Nissan Motor Co. and Renault SA were poised to step up their capital tieup talks Thursday with Japan’s No. 2 automaker facing a potentially devastating downgrade in creditworthiness.
With the negotiations now centered on whether the French automobile group should be permitted a 33.4 percent equity stake in Nissan, the automakers will seek to wrap up the talks by the end of this month, auto industry sources said.
A 33.4 percent stake would give the holder the right to veto key issues at a shareholders’ meeting.
The anticipated talks followed an announcement by DaimlerChrysler AG that it had decided to terminate capital tieup negotiations with Nissan.
In response, Moody’s Investors Service Inc. on Thursday lowered the long-term debt rating of Nissan Motor Co. to Ba1, a speculative grade, from Baa3 because of the company’s huge debt and future risks.
The two automakers have the potential to complement each other with great effectiveness because their production facilities do not overlap. In addition, Renault is strong in Europe’s small passenger car market, which could help Nissan penetrate, while Renault stands to gain from Nissan’s advanced knowhow in environmentally friendly technologies as worldwide clean-air requirements continue to tighten.
But other uncertainties may undermine the tieup talks. If, for example, U.S. automaker Ford Motor Co. decides to resume its pursuit of a Nissan stake, it would probably sink Renault’s chances of tying successfully with the troubled automaker.
In addition, Nissan and Renault are not dominant in any particular market sectors, which could make their alliance during a time of massive restructuring marked by megamergers a tenuous one, at best.