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Renault looks at restructuring Nissan alliance

Bloomberg

Renault SA is considering plans to restructure its alliance with Nissan Motor Co., including giving its Japanese partner more power to contain the growing influence of the French government, people familiar with the matter said.

Renault is proposing options, including cutting its stake in Nissan to trigger its voting rights, said the people, who asked not to be named because the talks are private. A resolution by the board, which met Tuesday, is not expected soon, as the government is not in favor of the move, the people said. Representatives for Renault, Nissan and the government declined comment.

Carlos Ghosn, who is chairman and chief executive officer of both automakers, is seeking to make the alliance more balanced. The 16-year-old partnership is secured by Ghosn’s dual roles and cross-shareholdings that favor Renault. The French carmaker owns 43.4 percent of Nissan, which in turn holds 15 percent of Renault. The Japanese company, however, does not have voting rights because the French manufacturer is considered the controlling partner. Those rights could be revived if Renault’s stake falls to less than 40 percent, the people said.

“There’s a logic for a rebalancing of the alliance,” said Philippe Houchois, a London-based analyst at UBS Group AG. “There’s too much capital that’s being immobilized right now.”

The situation highlights the conflict between Ghosn and the government that arose five months ago after the state increased its stake in Renault to 19.74 percent from 15.01 percent without informing the carmaker. The move was meant to boost France’s power at Renault by pushing through a loyalty-shareholder program, which doubled the voting rights of investors who have held stock for more than two years.

The alliance’s structure was created when Nissan was on the verge of bankruptcy. But the Japanese carmaker has since become more profitable than Renault, contributing €1.56 billion ($1.75 billion) to its partner’s bottom line last year. Yokohama-based Nissan is also worth twice as much as Renault, raising questions about the viability of the tie-up’s structure even before France’s move.

The government still controls more than 19 percent of Boulogne-Billancourt-based Renault’s shares and has not yet sold down the stake to the original 15.01 percent as planned. While French authorities support Ghosn’s strategy, they favor the status quo as far as the alliance structure is concerned, one of the people said.

France and Nissan each have two representatives on Renault’s 19-member board of directors.