Automakers Renault and Nissan have agreed on a far-reaching realignment of the alliance they sealed more than two decades ago. The French group will reduce its stake in its Japanese partner from 43% to 15% so that they both have an equal stake in the other company, it said in a statement this Monday. With this agreement, Nissan achieves its goal of rebalancing a relationship that has not been without tensions in recent years, and Renault gains its ally to invest in its electric car division.
The Japanese manufacturer has been trying for some time to limit the control of the French company in its management, a situation that has repeatedly caused tension between the two companies. From now on, companies will be treated equally: they will have voting rights equal to their 15% stake, no more. In Renault’s current dominance scheme over Nissan, the Japanese company had no voting rights in the French group. The companies ensure that this agreement guarantees “balanced governance”.
The remaining 28.4% of Renault’s stake in Nissan will be transferred to a French trust, where the voting rights for most decisions will be “neutralized” while the economic rights (dividends and proceeds from share sales) will be preserved. “Renault will direct the trustee to sell these Nissan shares in an organized and orderly process when economic conditions are appropriate for Renault, but there is no obligation to sell its shares by any specified time period,” the companies explain. The operation is still subject to the approval of the boards of directors of Renault and Nissan.
Executives from the two companies have been working for months on the agreement, which aims to “strengthen the alliance’s bonds and maximize value for all parties.” Renault manages to get Nissan to invest in Ampere, the French company’s electric car development business unit, “with the goal of becoming a strategic shareholder” in exchange for giving up its primacy in the alliance. The amount of the investment has not yet been quantified. They have also committed to working together on a number of joint projects in Latin America, India and Europe.
The pact marks one of the biggest changes in the relationship between the two auto giants since their alliance in 1999. Then the French company came to the rescue of the struggling Japanese company with an initial investment of 4,000 million dollars. In 2002, Nissan acquired a 15% stake in Renault’s capital, but without voting rights. Over the years, the French company increased its stake in the capital of its Japanese partner. Carlos Ghosn, former president of both companies, was one of the main conspirators of the alliance and for years he managed to resolve tensions and distrust between the two manufacturers, caused on numerous occasions by the power imbalance between the partners.
Since Ghosn left the group at the end of 2018 after he was arrested in Japan for tax fraud, the two companies have negotiated new cooperation formulas – it was even published in the press that the alliance was on the verge of breaking up – and they have as a third pillar was joined by Mitsubishi, which is involved in the development of around thirty electric car models. One of the most tense moments happened in 2019 when it emerged that Renault was contemplating a merger, which Nissan prevented.
Negotiations to reach the deal announced this Monday have been very tense, both due to differences over intellectual property issues and the valuation of Renault’s electric car business, according to sources quoted by Bloomberg agency. “The realignment in the shareholder structure yesterday should make Allianz viable, maintain synergies and open up new strategic opportunities,” said Philippe Houchois, analyst at Jefferies, in a statement.
While Nissan ended the Japanese market down 0.68%, Renault shares fell 4.4% to 36.52 euros on the Paris Stock Exchange. The French manufacturer, led by Luca de Meo, had a difficult year last year: in May it announced the sale of its assets to the Russian authorities and the abandonment of vehicle manufacturing in what was until then its second market. This operation, motivated by the outbreak of war in Ukraine, has resulted in net losses of 2,200 million euros, resulting in losses of 1,666 million in the first half of the year. Nissan also sold all of its assets to the Russian state for one euro, with a negative impact on its accounts of 707 million.
The automotive industry is going through a delicate phase, which also affects Nissan and Renault. Lack of supply of components, as well as energy and transport costs have weighed on supply and car registrations in the EU fell by 4.6%, although a recovery was noted at the end of the year, according to the Association of European Car Manufacturers .
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