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Renault rift with Nissan widens over governance, casts shadow on alliance

Reuters TOKYO/PARIS | Updated on June 10, 2019 Published on June 10, 2019

File Photo   -  Reuters

The alliance between the two automakers has been under pressure since the arrest of former Chairman Carlos Ghosn in November 2018.

The two-decade-old partnership of Renault SA and Nissan Motor Co was plunged into fresh crisis on Monday, as the French automaker's demand for a greater say in Nissan's new governance system drew rare public censure by the Japanese firm.

Renault, which owns 43.4 per cent of the Japanese firm, signalled it would block Nissan from formally adopting an overhauled governance structure at a June 25 shareholder meeting, unless Renault received representation on new Nissan committees.

The demand, conveyed in a letter from Renault Chairman Jean-Dominique Senard just weeks before the meeting, could scuttle the new structure, created after months of deliberation by an outside committee and previously supported by Senard. Nissan responded in some of its frankest language yet against its top shareholder, calling the demand “most regrettable”.

“Nissan has received a letter from Renault indicating intention to abstain from voting,” Nissan said in a statement. “Nissan finds Renault's new stance on this matter most regrettable, as such a stance runs counter to the company’s efforts to improve its corporate governance.”

Partnership under pressure

The rift lays bare the deep strain between the two automakers, whose alliance has been under pressure since the arrest of former Chairman Carlos Ghosn in November. What's at stake now may be even bigger than their vast alliance, which includes Mitsubishi Motors.

Renault and Fiat Chrysler Automobiles (FCA) are looking for ways to resuscitate their collapsed merger plan and secure Nissan's approval for that deal, Reuters reported on Monday. Nissan is, therefore, poised to urge Renault to significantly cut the 43.4 per cent stake, two people told Reuters.

Also read: Fiat Chrysler withdraws offer of merger with Renault

By abstaining from the governance vote, Renault would effectively block the new governance system — which includes three committees — as adoption requires two-thirds approval. Nissan recently said it would abstain from voting on the FCA-Renault merger, although both FCA and Renault later blamed the failure of that deal squarely on the French government.

“Renault's rights as 43.4 per cent shareholder of Nissan need to be fully recognised and, at a minimum, one or two directors proposed by Renault should be members of each of the three committees,” Renault said in its letter, a copy of which was viewed by Reuters. “As currently proposed, this does not seem to be the case.”

Conflict of interest?

A Renault source said Senard's letter was motivated by concern about Renault's under-representation on the new Nissan board committees being introduced following the arrest of Ghosn, who is now awaiting trial and denies the financial misconduct charges against him.

“It's not a final abstention, and Renault's position can still change,” the source said. “As things stand, Renault has not been assured of appropriate committee representation as Nissan's main shareholder.”

Renault had yet to receive specific details on the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.

A Nissan source said Renault CEO Thierry Bollore had expressed a desire to sit on new Nissan committees to oversee executive nominations and compensation, and a planned corporate governance auditing committee. But such a move would raise concerns about a possible conflict of interest, as it would give Renault a say in Nissan salaries and corporate governance, the Nissan source said. “It's shocking behaviour from a shareholder that has been saying for months that it supports us in strengthening our corporate governance,” the Nissan source said.

The source added that even if Renault blocked the committees, Nissan would still try and go ahead and set up similar governance structures, and try to make them as binding as possible.

Discussing differences

French Finance Minister Bruno Le Maire, in Tokyo after a G20 meeting at the weekend, told reporters it was up to the management of both companies to solve their problems. The French government owns 15 per cent in Renault.

The rift could put further pressure on Nissan Chief Executive Hiroto Saikawa, who looks increasingly at odds with Renault.

Japan's Jiji news agency earlier quoted Saikawa as saying: “We are preparing for the shareholder meeting and will discuss necessary issues at the appropriate time. If there are differences of opinion (with Renault), then I'd like for those to be discussed.”

In March, a Nissan-appointed outside team recommended the formation of the three committees to improve its corporate governance. Under the proposal, Renault directors would be free to serve on the nominations committee, but would be barred from the compensation and audit committees.

The two companies have struggled to repair their relationship after Ghosn's arrest exposed simmering tensions, including Nissan's long-held concerns about the alliance's capital structure. Nissan also appears to have been largely left in the dark on the merger discussions between Renault and Fiat Chrysler, which had attempted to join forces to create the world's third-largest automaker before talks fell apart last week.

Published on June 10, 2019

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