After FCA fiasco, time for Renault, Nissan to rebuild partnership

Nobody would have anticipated the dramatic sequence of events that followed Carlos Ghosn’s arrest last November.

During the seven months since the former Chairman of Renault and Nissan was whisked away to a Tokyo jail, the two partners are doing their best to cement a relationship that is threatening to come apart.

While Ghosn’s arrest stunned the world, it was clear that Renault was shocked by the abrupt turn of events. Its ally of two decades, Nissan, had pulled off this dramatic arrest coup of its Chairman in complete secrecy. As relations between the two came under pressure, there was a change in leadership at Renault with Jean-Dominque Senard coming in from Michelin to take charge.

It is no secret that Nissan was miffed with its secondary role in the relationship right from its 15 per cent stake in Renault to the absence of voting rights. Its French partner held over 43 per cent and was also keen on a merger with Nissan.

Reports suggest that Ghosn wanted to push this through, much to the annoyance of Nissan, and this was one of the key reasons for putting him in custody. He is out on bail now and would be keeping an eye on the developments that have been unfolding over the last few months.

Ghosn’s successor, Senard, was also keen on a Renault-Nissan merger but the Japanese ally was not interested. In the meantime, Fiat Chrysler Automobiles (FCA) reached out with a merger proposal to Renault in the fourth week of May.

Nissan was not going to be part of this plan even while the automotive world was agog with the prospects of a new entity, which would emerge the world’s third largest car-maker after Volkswagen and Toyota. However, the script turned awry with the French government insisting on more time to study the deal. As a 15 per cent shareholder in Renault, it was also keen to keep the rapport going with Nissan.

The Japanese auto-maker would have been naturally miffed not to be part of the planned FCA-Renault combine. Support came from the French government but procrastinating on the FCA offer prompted the latter to call off the merger talks in just 10 days of making the offer.

Clearly, the entire episode will have left a bitter taste in Renault’s mouth especially when it was as enthusiastic about teaming up with FCA. Further, a representative of the French government has also indicated that it would be quite open to the idea of diluting its stake if it meant strengthening the allliance with Nissan.

The problem now is that there are far too many people involved in this entire drama with no clear leader holding forth on the way ahead. This is where Ghosn played such a key role though it could be argued that he was guilty of micromanagement and excessive control. On the other hand, things have just been going haywire since he exited the scene and healing wounds now is not going to be a cakewalk.

Nissan’s CEO Hiroto Saikawa and Senard will really have to work extra hard to bury the past and rebuild the future. Nissan is not in great shape right now but could still be resistant to the idea of a merger with Renault. Senard will need to assure his counterpart that operating as one entity is in everyone’s interests. For now, things are looking shaky and it remains to be seen how the script pans out in the coming months. Speculation is rife that FCA and Renault could start talks all over again but how will the French government react to such a move?

If this were to happen, it is perhaps best for the different stakeholders to try and accommodate each other’s interests. Perhaps, Nissan should be a part of the merged entity and not left in the cold as was the case the first time around. Some give-and-take will help take things forward since the larger merged entity (with Nissan and Mitsubishi) will be the largest in the world with volumes of over 15 million vehicles annually.

Ghosn may have had his faults but it was he who stitched the alliance successfully 20 years ago when Nissan was down and out. The fact that it grew into a strong combine was even more significant considering that the Daimler-Chrysler merger, which was also created in the 1990s, fell apart after promising the moon.

Cultural compatibility is not the easiest of tasks to achieve and it is remarkable that Renault and Nissan have stuck together for two decades now. In the process, they have achieved huge synergies in costs while roping in Mitsubishi into the alliance.

While Ghosn is now rapidly slipping into oblivion, there is no reason for the successful partnership that he created to implode. Renault and Nissan should begin the process of regaining each other’s trust and try and put past differences behind.

Should FCA step into the picture again, every effort should be made to check if the new marriage will work with the Renault-Nissan-Mitsubishi combine. This is the best way forward to ensure that a partnership carefully built and nurtured for over two decades does not fall apart.

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