Rejigged Renault-Nissan alliance looks headless

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Flags of Japan, France and Nissan are seen at Nissan Motor Co.'s global headquarters in Yokohama
Flags of Japan, France and Nissan are seen at Nissan Motor Co.'s global headquarters in Yokohama, Japan, February 14, 2019.

LONDON/HONG KONG, Jan 30 (Reuters Breakingviews) - Renault (RENA.PA) and Nissan (7201.T) have helped their 24-year alliance move forward after four years of stalemate. The deal marks the end of the French group’s domination of its Japanese partner, and addresses festering governance issues. But without a clear leader, decision-making may become fuzzier.

After months of talks, the two groups can at least keep their industrial collaboration alive. Relations had been fraught since the ouster of alliance Chairman Carlos Ghosn in 2018. They were worsened by the union’s lopsided governance, with Renault’s 43% stake in Nissan giving it a stronger say than its partner. The status quo put future investment at risk just as the automobile industry shifts to electric vehicles.

To improve relations, the French government, which owns a 15% stake in Renault but calls the shots on the company’s strategy, has agreed to let the French carmaker park a 28% Nissan stake in a trust, without voting rights. Renault will only now vote the remaining 15% of its current holding, thus evening out the governance: under French regulation, Nissan can now also vote its own 15% stake in Renault.

The reshuffle helped Renault convince the Japanese group partner to invest in the electric vehicle division it plans to spin off by the end of the year. For now, the two groups only say that Nissan will be “aiming to become a strategic shareholder” in the unit, to be called Ampere.

The deal might help reduce the valuation discount that has affected Renault over the years. Its shares fell more than 2% on Monday, perhaps due to the French group’s lack of firm commitment to sell the 28% Nissan shareholding, which is worth some 3.8 billion euros. Throw in a mooted 10 billion euro valuation for Ampere, and Renault’s current market capitalisation of 11 billion euros will look cheap if the spinoff proceeds smoothly.

Nissan does not only benefit from fairer governance. It will continue to enjoy economies of scale generated by both companies pooling purchasing or research budgets. Nissan’s shares have more than halved since the ouster of Ghosn in 2018 undermined the alliance.

But there are limits to the reset. Decision-making between two equal partners with separate management will be trickier without a strong joint chairman or chief executive. That may make it harder to resolve squabbles over future investments or technology sharing, for example. The months of negotiations required even to reach this small step forward do not suggest a smooth ride ahead.

Long road: Renault and Nissan's shares have underperformed peers

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(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)


Nissan Motor and Renault have agreed to restructure their automaking alliance, the companies said in a joint statement released on Jan. 30.

Under the deal, which is still subject to board approvals, Renault will reduce its stake in Nissan to 15% from around 43%, transferring the 28% stake in the Japanese automaker to a French trust, according to the statement.

The voting rights of the Nissan shares transferred to the trust will be "neutralised" for most decisions, the statement said. Furthermore, both Renault and Nissan will be able to exercise the voting rights of the shares they retain, with a 15% cap, it added.

Renault would then instruct the trustee to sell those shares, worth around $4.1 billion at current market values, if commercially reasonable for the French automaker, in a coordinated and orderly process, it added.

Nissan also said it would invest in Renault's new battery-electric vehicle unit. The statement did not reveal the size of the investment or likely valuation.

Renault shares fell 2.7% to 37.16 euros, as of 0837 GMT. Nissan shares were largely unchanged at 453.9 yen.

Editing by Neil Unmack and Streisand Neto

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Katrina Hamlin is global production editor, based in Hong Kong. She is also a columnist, writing on topics including environmental policy, cleantech and green finance, as well as the gambling industry in Macau and Asia. Before joining Reuters in 2012, Katrina was deputy managing editor of Shanghai Business Review magazine. She graduated from the University of Oxford with an MA in Classics, and earned a Masters of Journalism with distinction from the University of Hong Kong.