Abu Dhabi, UAESaturday 20 July 2019

Japan unaware of Renault-Nissan talks as France downplays report

Fiat Chrysler Automobiles is aiming to restart merger talks with Nissan with a year, according to The Financial Times

Nissan's chief executive Hiroto Saikawa said on Thursday he wasn’t aware of the talks about possible bid for FCA  Photo: Getty Images
Nissan's chief executive Hiroto Saikawa said on Thursday he wasn’t aware of the talks about possible bid for FCA  Photo: Getty Images

Nissan's chief executive officer and a Japanese government official both said they were unaware of talks about deal-making around the embattled Renault-Nissan partnership after a newspaper report projected their merger and then a potential tie-up with Fiat Chrysler Automobiles. France earlier appeared to downplay the possibility.

The Financial Times reported the French manufacturer is aiming to restart merger talks with Nissan within a year as the first step toward creating a bigger auto conglomerate that could involve a bid by both companies for Fiat. Spokesmen for Renault, Nissan and Fiat Chrysler declined to comment on the report.

Nissan chief executive Hiroto Saikawa said on Thursday he wasn’t aware of the talks about possible bid for FCA. Also, Japan chief cabinet secretary Yoshihide Suga said the government is unaware of the facts related to reports about Renault restarting the merger talks with Nissan. He added that any specific movement toward maintaining or strengthening the alliance should be discussed “in a manner satisfactory” to the related parties. Mitsubishi Motors chief executive Osamu Masuko also said he’s heard ”absolutely nothing” about such talks.

The French state is Renault’s most powerful shareholder with extra voting rights and a 15 per cent stake. “The absolute priority for the French state is the Renault-Nissan Alliance,” government spokesman Benjamin Griveaux said. Decisions made this month about governance should allow it to “get to work".

Renault and Nissan earlier this month unveiled a new board to govern their alliance, which has been on shaky ground ever since the November arrest of former head Carlos Ghosn, who is awaiting trial for alleged financial wrongdoing. He has denied the charges. Mr Ghosn had planned to cement their alliance, yet such a move faced resistance from within Nissan due to a power imbalance within the two company’s shareholding structure.

The new alliance board led by Renault chairman Jean-Dominique Senard has improved confidence so that the two sides can push ahead with merger plans, the Financial Times reported, citing unidentified people familiar with both sides’ thinking.

A combination of Renault, Nissan, Fiat and Chrysler would create an automaker that could better compete against global competitors such as Volkswagen and Toyota Motor Corporation. Mr Ghosn held talks about merging Renault with Fiat Chrysler two to three years ago, but was stopped by the French government, according to the report.

Fiat Chrysler is seeking a partnership or merger, and Chairman John Elkann has met with other rivals, including Peugeot-maker PSA Group of France, to gauge the possibility of a deal, the newspaper reported.

Renault, which owns 43 per cent of Nissan, has a market capitalisation of 17.3 billion euros (Dh71.4bn). Nissan, which in turn owns 15 per cent of Renault, has a market capitalisation of about 3.85 trillion yen (Dh0.12tn), while Fiat Chrysler’s is 20.8 billion euros.

The lopsided ties between Renault and Nissan have made an all-out merger between the two controversial. Before his arrest, the French government tasked Mr Ghosn with cementing their alliance. Such a move faced internal opposition at Nissan, including from Saikawa. Instead of a deeper capital tie-up, Nissan has sought to improve the Japanese bargaining position in a partnership it has said has for too long favored the French side.

In the face of strains, the idea of adding Fiat Chrysler to the mix, with its management and production cultures from Italy and the US, would be a tall order. Further complicating any talks is the fact that the French government stake potentially would be diluted.

“I think it’d be opportune, but when it comes to feasibility, it’s another story,” said Arnaud Ayme, a consultant for SIA Partners who has worked for a number of carmakers, including Renault, but doesn’t speak for any of them. “It wouldn’t be easy.”

Rocky relations between France and Italy wouldn’t help any combination between the companies, he said.

In the past, the Renault-Nissan alliance often has been cited as an example of a successful combination that didn’t go as far as a merger, underpinned by cross-shareholdings and cost cutting. Yet the partnership has been challenged by the scandal surrounding Mr Ghosn, with insiders from both sides saying trust between the two teams was severely tested.

The partnership this month agreed to a new governance structure designed to streamline operational decisions, with Mr Senard placed as the chairman. An outside corporate-governance panel also released recommendations for Nissan on Wednesday that include creating a more independent board.

Updated: March 28, 2019 12:59 PM

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