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Nissan Braces for a Break with Renault

A team of high-level executives at Nissan is stepping up what-if plans to go it alone should the company’s 20-year-old alliance with Renault fall apart.
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A team of high-level executives at Nissan is stepping up what-if plans to go it alone should the company’s 20-year-old alliance with Renault fall apart.

The war-gaming is looking at how Nissan would carry on if it had to rebuild such activities as product engineering and vehicle production, sources tell the Financial Times. Both of those critical operations are deeply intertwined with the same functions at Renault.

The contingency planning predates last year’s arrest of Carlos Ghosn, then-chairman of both companies. But FT says the urgency has ramped up over the past several months.

Critical Timing

Nissan has been irritated for years by the equity imbalance of the Renault alliance. Renault holds a 43% voting stake in Nissan, but the Japanese company owns only a nonvoting 15% share of Renault.

That arrangement made sense when the partnership began in 1999. At the time, Renault was a financial powerhouse, and Nissan was near bankruptcy.

But the tables turned a decade ago, when Nissan, revived by Ghosn’s leadership, began contributing most of the alliance’s sales, revenue and profits. The arrangement became even more lopsided in 2017. That’s when Nissan acquired a controlling 34% stake in Mitsubishi Motors and added that company to the alliance.

When Renault—egged on by the French government, which owns 15% of the company—began to press Nissan to merge two years ago, Nissan balked. Ghosn’s dictatorial management style suppressed open rebellion. But that control vanished when he was removed nearly 14 months ago.

What’s Next?

Nissan and Renault both recognize that size matters in the auto industry. If they split up, the two companies will face enormous pressure to find new partners and restore the scale they need to survive.

Renault’s post-Ghosn management is downplaying the merger option but pushing hard to enhance the alliance. FT says many executives at Nissan believe the relationship has become too toxic to repair.

For Renault, the question is whether the French government will reverse its refusal to allow changes in the alliance’s equity arrangement. For Nissan, the choice is whether to fix a flawed but deeply ingrained relationship or take its chances with another company and hope for the best.

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