Time for Stock Sales at Nissan and Renault?
Should Nissan and Renault loosen the glue that holds their alliance together?
Maybe so, Bloomberg News reports. The idea would be for both companies to sell off much of their shareholdings in each other and use the proceeds to help pay for electrification, autonomous driving systems and other costly technologies.
Nissan has been pushing for an equity adjustment for years, but for a different reason. It wants to better balance control within the 20-year-old Renault-Nissan alliance, which has ruled by Renault from the start.
The French company owns 43% of Nissan’s voting stock. Nissan holds a 15% stake in Renault but has zero voting rights. That arrangement was set when the two carmakers began their partnership in 1999. The balance hasn’t changed in the slightest since then, even after Nissan’s Mitsubishi Motors affiliate joined the alliance in 2017.
The cross ownership ratio made sense in 1999, when Nissan was near bankruptcy and Renault swooped in to save the day. But that was then. In recent years, most of the partnership’s sales and profits have come from Nissan, not Renault.
The lack of a meaningful say in big decisions about the alliance deeply irks Nissan. But the French carmaker is in no mood to cede power.
Neither is the French government. It owns 15% of Renault (with double voting rights) and holds a decidedly France-centric view of alliance priorities. The French contingent keeps telling Nissan the focus should be on bolstering the alliance itself. They’ve been reemphasizing that view since last year’s colorful departure of Carlos Ghosn, who led Nissan’s revival and eventually became chairman of Renault, Nissan, Mitsubishi and their alliance.
At least one reason for Nissan’s orchestration of Ghosn’s arrest and eventual charges of financial wrongdoing was to thwart Renault’s plan to fully merge the two companies, according to recurring media reports. A merger, of course, would crush Nissan’s desire for a sense of independence.
The idea of stock sales for the sake of funding alliance tech programs is a new wrinkle in this drama. Bloomberg says Nissan’s senior management is pondering the concept, at least in general terms. Last week an analyst at Citigroup, warning of the enormous challenges facing Renault to keep up with a rapidly evolving auto industry, floated the same idea.
There is a hitch, though: Both companies are in the middle of sales slumps, and their stock prices are depressed. By the latter measure, Renault is Europe’s worst-performing car company. Nissan’s shares have skidded 50% in two years.
Even so, Renault’s stake in Nissan currently is worth nearly $9.5 billion. Even a portion of that amount would deliver immediate aid to the company.
Analysts appear split over whether rattling the equity structure of the Renault-Nissan-Mitsubishi alliance will topple it or make it stronger than ever. Meanwhile, the pressure to make a decision continues to build.
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