Renault SA Chairman Jean-Dominique Senard arrived in Tokyo with a crucial mission: to sell the proposed merger between Fiat Chrysler Automobiles NV and Renault SA to longtime partner Nissan Motor Co.
Senard, who is said to be tapped to lead the combined company, attended a monthly scheduled the morning of May 28 for the board overseeing the alliance among Nissan, Renault and Mitsubishi Motors Corp.
While neither party has disclosed what was discussed, there was plenty to talk about. Under the terms of the Fiat proposal, Nissan will gain voting rights of 7.5% in the new entity, compared with no voting rights attached to its cross-held shares in Renault. A merger also would dilute the French state’s control over Renault, and indirectly over Nissan, easing a concern the Japanese company has had for years.
Senard’s goal is to ensure that they all work well together. Although Nissan and Renault have been partners for two decades, the Japanese automaker isn’t in a position to block the deal. Nissan doesn’t own a controlling stake in the French company, and a merger wouldn’t breach their operating agreement.
Even so, Nissan is a critical part of what would be a global carmaking confederation that would produce 15 million cars a year, the most in the world. Renault and Fiat both need Nissan to facilitate access to markets in China, Japan and the rest of Asia, as well as electric vehicle technology.
Nissan CEO Hiroto Saikawa told reporters on his way to the meeting that he’s interested in learning more about the deal and its impact on the company. “There may be opportunities, but I want to look at it closely from Nissan’s point of view,” he said.
Nissan CEO Hiroto Saikawa (Akio Kon/Bloomberg News)
The three-way alliance issued a statement saying that they held an “open and transparent discussion” on the merger proposal. “The meeting also discussed and positively concluded several current operational alliance matters,” the partners said.
“Senard has to convince the board members of Nissan this is probably a better idea for Nissan,” said Koji Endo, an analyst at SBI Securities in Tokyo. “He will have to reassure not only Nissan but also the Japanese government that Nissan will remain as one independent company, because that’s their primary concern.”
Renault’s board is expected to give preliminary approval to Fiat’s proposal as soon as next week, according to people familiar with the matter. While Fiat and Renault aren’t seeking a merger with Nissan for now, the companies plan to invite Nissan and Mitsubishi Motors to join forces, they said.
“The benefits that would accrue from a combination of Groupe Renault and FCA, we believe, would also extend to the Alliance partners Mitsubishi and Nissan,” Fiat Chrysler told its dealers and suppliers May 27. “We look forward to engaging with them on even greater, mutually beneficial opportunities.”
Former Renault Chairman Carlos Ghosn (Junko Kimura-Matsumoto/Bloomberg News)
At stake are the companies’ abilities to compete as the industry faces multiple challenges. With sales falling in the world’s biggest car markets, manufacturers are being pushed by regulators to electrify and reduce fleet emissions, forcing them to combine efforts and investments. They also need to spend heavily on self-driving technology or risk getting left behind by new, deep-pocketed competitors such as Alphabet Inc.’s Waymo.
Although Renault owns a 43% stake in Nissan, the Japanese automaker is the bigger partner by sales and owns 15% of Renault, with no voting rights. Nissan sold 5.65 million cars last year, more than Renault’s 3.88 million units, but its profitability has been on the decline. Hurt by slumping U.S. sales, aging vehicle models and an out-of-sync product cycle, the Japanese automaker issued an outlook for weak operating profit and cut its dividend for the first time in a decade.
The alliance was destabilized six months ago with the arrest of Carlos Ghosn, its architect and chairman, for alleged financial crimes during his time as leader of the Japanese carmaker. Ghosn has denied all of the charges and is preparing for his trial, which probably will start next year.