Renault and Nissan ease tension with pact to reshape alliance

French car maker will cut its holding in Japanese partner to 15%, from 43%, to rebalance capital ties

Jean-Dominique Senard, chairman of Renault, speaks during a news conference in London.  Renault and Nissan Motor Co.  signed a deal aimed at easing longstanding tensions between the two companies Photographer: Jason Alden / Bloomberg
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Renault and Nissan have signed a deal aimed at easing long-standing tension 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 per cent, from 43 per cent, to rebalance capital ties, the partners said on Monday, resolving a cause of friction that slowed co-operation at a crucial time for car makers globally.

The agreement also includes the joint development of several models globally.

Nissan intends to invest in Renault’s electric-vehicle business Ampere in exchange for a stake as big as 15 per cent stake in the entity, which is being separated from the French car maker's combustion-engine and power-train operations.

Mitsubishi, the junior partner in the alliance, will also consider 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 Luca de Meo told reporters at a briefing in London.

“The relevance of these projects has been underestimated so far.”

The ventures include the development of several new models at production sites in South America and India from joint platforms, as well as Europe, including an electric van called the FlexEVan.

In Renault’s core region, the partners will also collaborate on electric vehicle 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.

“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,” said Tatsuo Yoshida, Bloomberg Intelligence analyst.

“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.”

After months of negotiations with Renault, Nissan announced  last month that the French car maker had agreed to lower its stake in Nissan to 15 per cent, from 43 per cent, the same percentage the Japanese car maker holds in Renault. EPA

Mr de Meo, who first publicly spoke about a plan to overhaul Renault last February, worked for months to rebuild trust with Nissan chief executive Makoto Uchida in a bid to reset the partnership.

Discussions intensified in October when Mr Uchida and chief operating officer Ashwani Gupta met in Japan with Mr de Meo and Francois Provost, who oversees Renault’s partnerships.

The agreement helps to fix an imbalance that has been a source of tension and resentment for years.

While Renault has an outsize stake in Nissan, the Japanese car maker 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 does not. Five years ago, fears that Ghosn — chairman of both companies and its alliance at the time — would seek closer integration, including a merger, was a factor in his removal and arrest on charges of underreporting compensation.

Renault plans to transfer 28.4 per cent of its shares in Nissan into a French trust, with voting rights to be neutralised for most decisions.

The company will keep on benefitting 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 co-ordinated 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 Barclays analyst Henning Cosman.

Updated: February 06, 2023, 9:47 AM