Commentary / Japan

Macron gets it all wrong over Nissan

by Lionel Laurent

Bloomberg

Like a practitioner of the Japanese art of kabuki, Emmanuel Macron’s administration is going through some elaborate dance steps to try to shape the future of the Renault-Nissan carmaking alliance. The French president wants to protect the jobs of his citizens, as well as taxpayer money and France’s credibility as an industrial investor. It’s been an incredibly clumsy performance.

France controls 30 percent of the voting rights in Renault SA and would like to tempt Nissan Motor Co. into a full-blown merger to heal the rift exposed by the downfall of Carlos Ghosn, the former Renault boss and architect of the two companies’ alliance. Nissan is having none of it. According to Bloomberg News, the Japanese company rebuffed the idea in April and remains opposed. Tokyo’s view seems to be that the alliance already has the benefits of scale and cost savings, and a merger wouldn’t add much.

Nissan’s argument may be unconvincing in terms of its financial logic (a full-blown merger would obviously allow for fewer overlaps), but it should surprise nobody. Paris’s dream of combining Renault and Nissan helped trigger the Ghosn crisis in the first place, with the former alliance boss pushing for a deal before his arrest in November.

Given the already lopsided distribution of power — Renault owns 43 percent of Nissan, but the latter owns just 15 percent of its French partner — Japanese hackles were well and truly raised by Ghosn’s perceived power grab. Nissan would rather see Renault pare down its stake than enter into a potentially fraught merger agreement.

So it’s surprising that Paris would keep trying to sell such an unpopular idea to Tokyo. Ghosn’s replacement as Renault chairman, Jean-Dominique Senard, is the son of a diplomat and has experience negotiating with difficult partners like trade unions from his time running the tire-maker Michelin SCA. He must know he’s pushing at a closed door.

Likewise, Macron and his finance minister Bruno Le Maire have had plenty of recent experience of what goes wrong when the French state meddles too much in the affairs of multinational corporate partnerships. France’s awkward handling of its airline alliance with the Dutch, Air France-KLM, has prompted the Netherlands to build its own government stake as a form of defense.

Maybe there’s a misguided notion from Macron — a former Rothschild banker — that talking up a merger might offer some kind of theoretical support to Renault’s flagging share price, which has fallen about 38 percent over the past year, versus a European peer group down 23 percent. Bloomberg Intelligence analyst Michael Dean estimates that Renault’s core business, excluding its stake in Nissan and its net cash, is valued by the market at less than zero.

Senard and Macron might also be betting that Nissan’s own financial problems have earned them the right to apply more negotiating pressure. On Tuesday, the Japanese carmaker reported a 57 percent drop in net profits in the year that ended in March, citing poor sales in the U.S. market. These are not comfortable times for Nissan chief executive Hiroto Saikawa, whom Ghosn has signaled was close to being fired before his arrest.

Still, in such a politically delicate drama, this all feels like too much, too soon. The most charitable interpretation of France’s continued pressure is that it realizes a full merger is out of the question, but that it might get a more advantageous reworking of the shareholder split if it keeps asking for something bigger. Regardless, Macron and Senard would do better to defuse tensions in an alliance that is so important to France, rather than exacerbate them. If that means reducing Paris’s influence by selling down its own Renault stake, so much the better.

Based in London, Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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