Business / Corporate

Nissan extends olive branch to Renault as relations hit new low

Bloomberg, JIJI

Nissan Motor Co. Chief Executive Officer Hiroto Saikawa has extended an olive branch to Renault SA after acrimony over proposed governance changes at the Japanese automaker.

In an interview with the Financial Times, Saikawa said Nissan must “make our peace” with the French carmaker. The companies need to “stabilize and reinforce” their partnership, he told the newspaper. “This is the most important thing.”

Hostilities between Nissan and Renault have plumbed new lows, threatening their two-decade alliance. It’s not clear whether any cease-fire will hold: Saikawa himself has criticized Renault’s plan to stymie Nissan’s board reforms. That, in turn, was an apparent riposte by Renault after Nissan refused to endorse a deal with Fiat Chrysler Automobiles NV.

In the interview, Saikawa described the alliance between Nissan and Renault as a “cradle” for cooperation and value creation. “I am quite convinced we need to work it out, and we will,” he told the newspaper. A representative for Nissan confirmed the interview took place but declined to provide details of the conversation.

Relations between the carmakers were already strained by the arrest in Tokyo last November of Carlos Ghosn, the industry titan who oversaw the manufacturers and their alliance. That crisis triggered plans for sweeping corporate governance reform at Nissan’s board. Saikawa had said it was “most regrettable” that Renault planned to hinder those changes.

The implosion of Renault’s merger plans with Fiat brought the conflict into the open, with Nissan’s reluctance to endorse the deal said to be partially responsible for its failure.

In the aftermath, Renault Chairman Jean-Dominique Senard sent a letter threatening to block Nissan’s plans to overhaul its governance structure — changes that had been hashed out in the wake of the Ghosn scandal. Renault holds a 43 percent stake in the Yokohama-based company.

In an unusual public statement, Nissan on Monday confirmed that it had received the letter, and upbraided Renault for its position. The corporate-governance reform “was discussed thoroughly by Nissan’s board and approved by all board members, including Renault’s own nominees,” Saikawa said in the statement. “Such a stance runs counter to the company’s efforts to improve its corporate governance.”

On Tuesday, Minister of Economy, Trade and Industry Hiroshige Seko expressed “serious concern” about Renault SA’s reported move to block Nissan’s governance reform plan.

“We’re closely watching with serious concern whether Renault will abstain from a vote on the key corporate governance reform or vote for it,” he told a news conference.

Nissan also seized on comments made by the finance minister of France, Renault’s biggest shareholder, that his government is willing to reduce its stake to strengthen the alliance. Nissan, which has long chafed against French influence, would prefer a full exit by the government, people familiar with Nissan’s thinking said, asking not to be identified because the information isn’t public.

“Overall it is a mess, and just makes a tricky situation worse,” said Janet Lewis, an analyst at Macquarie Capital in Tokyo. “Senard’s threat to abstain on the corporate governance reform is very negative for the alliance.”

Senard, who was brought in by the French government to smooth the relationship with Nissan, has instead pressed Nissan for a merger it didn’t want, then pursued the mega-deal with Fiat Chrysler. In the letter to Nissan, Senard said the French automaker is seeking better representation within Nissan’s plan to set up three committees on nominations, remuneration and auditing, according to a person familiar with the matter, who cautioned that Renault hasn’t made a final decision on its vote and was still in negotiations.

While Renault understands Nissan’s desire to improve its governance, the so-called three board level committees system “should not serve as a tool directed or used against Nissan’s largest shareholder,” the letter said. Nissan shareholders are set to meet on June 25 to vote on the structure.

The latest crisis erupted a week ago, when Renault’s merger talks with Fiat fell apart. Nissan’s two representatives to Renault’s board had planned to abstain on the plan, prompting the French state to pause discussions — which then caused Fiat to pull out.

Even so, chairmen of both Fiat and Renault have since met, and the automakers are looking for ways to revive the merger plan and gain Nissan’s approval, Reuters reported Monday.

French Finance Minister Bruno Le Maire, in Japan to attend G20 meetings, sought to patch up tensions but ended up reminding the Japanese company of his government’s outsized influence over the automakers afforded by its 15 percent stake in Renault.

Renault and Nissan produced a combined 10.6 million vehicles last year. A separation could result in years of disarray because Renault and Nissan cooperate on engineering, manufacturing, supply chain management, purchasing and human resources.