Renault SA and Nissan Motor Co. signed a deal aimed at easing longstanding tensions between the two companies, allowing them to move forward at a time of unparalleled challenges for the automotive industry.
(Bloomberg) — Renault SA and Nissan Motor Co. signed a deal aimed at easing longstanding tensions between the two companies, allowing them to move forward at a time of unparalleled challenges for the automotive industry.
As part of the hard-won pact, Renault will cut its holding in Nissan to 15% from 43% to rebalance lopsided capital ties, the partners said Monday, resolving a cause of friction that slowed cooperation at a crucial time for carmakers globally. The agreement also includes joint development of several new models globally.
Nissan intends to invest in Renault’s electric-vehicle business Ampere for as much as a 15% stake in the entity that’s being separated from Renault’s combustion-engine and powertrain operations. Alliance junior partner Mitsubishi Motors Corp. will also weigh investing in Ampere.
The partners agreed to collaborate on several industrial projects, with a final pact still subject to a limited number of conditions, including regulatory approvals expected to be cleared by the end of the first quarter. The deal is scheduled to close by the end of the year.
Those projects could generate hundreds of millions of euros in profit for the companies over time, stretching to billions “if things go very, very well,” Chief Executive Officer Luca de Meo told reporters at a briefing in London. “The relevance of these projects has been underestimated so far.”
The new ventures include developing several new models at production sites in South America and India from joint platforms, as well as Europe, including an electric van dubbed FlexEVan. In Renault’s core region, the partners will also collaborate on EV charging and recycling.
The agreement is designed to give new impetus to an almost 24-year-old partnership that nearly collapsed after the 2018 downfall of its former leader Carlos Ghosn. The new alliance deal will be put in place for an initial period of 15 years.
Today’s agreement caps months of fraught negotiations made more difficult by different time zones, with crucial meetings often taking place by video conference in the middle of the night. Cultural differences between France and Japan led to frequent misunderstandings, further exacerbating the mutual suspicion that had been dogging the alliance for years.
Tatsuo Yoshida, Bloomberg Intelligence analyst, said:
“For Nissan, greater freedom in management is a positive development. The projects are essentially initiatives that have been stagnant until now, and the alliance should already have been working on them. If Nissan buys back its own shares and then cancels them, that would be positive for Nissan’s stock price, but considering its current cash, that unlikely to happen right now.”
De Meo, who first publicly spoke about a plan to overhaul Renault last February, worked for months to rebuild trust with Nissan CEO Makoto Uchida in a bid to reset the partnership. Discussions intensified in October when Uchida and Chief Operating Officer Ashwani Gupta met in Japan with de Meo and Francois Provost, who oversees Renault’s partnerships.
The agreement helps alleviate an imbalance that’s been a source of tensions and resentment for years. While Renault has an outsize stake in Nissan, the Japanese carmaker sold 3.3 million vehicles in 2022 compared to its partner’s 2.05 million. Renault’s stake also includes voting rights while Nissan’s doesn’t. Five years ago, fears that Ghosn — at the time, the chairman of both companies and its alliance — would seek closer integration including a merger was a factor in his ouster and arrest on charges of underreporting compensation.
Renault plans to transfer 28.4% of Nissan shares into a French trust, with voting rights to be neutralized for most decisions. The company will keep on benefiting from Nissan dividends until the stake is sold. The trustee will be instructed to sell the shares when it will be “commercially reasonable” in a coordinated and orderly process. Moreover, Renault has no obligation to sell the stake within a specific time frame.
“A well-working alliance is highly desirable for economies of scale and cost avoidance, but it remains to be seen whether a smaller stake in Nissan can achieve this,” said Henning Cosman, an analyst at Barclays Plc.
–With assistance from Reed Stevenson, Julien Ponthus, Ania Nussbaum, Tsuyoshi Inajima and Masatsugu Horie.
(Updates with details throughout)
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