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Renault CEO says closer ties with Nissan possible if French government sells stake - FT

Renault [EPA:RNO], a French car manufacturer, and Nissan [TYO:7201], its Japanese counterpart, are ready to consider a closer relationship if the French government sells its shareholding in Renault, the Financial Times reported. The newspaper quoted Carlos Ghosn, CEO of both companies, who said on Friday, 10 February that “everything” is on the table should the French government decide to exit its investment.

Renault and Nissan entered into an alliance after the French car maker rescued Nissan in 1999. As a result of the alliance, both companies have shareholdings in each other, although Renault effectively has control over its Japanese counterpart, the report explained.

The alliance was strained in 2015 after the French government added to its stake in Renault, the article said, noting that the government now holds a 19.74% stake.

Ghosn said Japan will never agree to be involved in a group in which the French government will hold a stake in “Japanese assets,” the item continued.

The French government would probably not sell its entire shareholding in Renault due to the strategic position of the automotive industry, the item said.

Renault reported FY16 net income of EUR 3.5bn (USD 3.72bn) on Friday, a 20% increase on the previous year. Revenues increased by 13% to EUR 51.2bn, the item noted.

Renault’s market capitalisation stood at EUR 24.78bn at the close of trading in Paris on Friday.

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Renault and Nissan open to forging closer ties

Chief says deeper relationship possible if Paris sells stake in French carmaker

Renault and Nissan are open to forging closer ties if Paris sells its stake in the French carmaker, the head of both companies said on Friday.

Carlos Ghosn, chief executive of Renault and Nissan, said that “the day the French state decides to get out, everything is open”.

He was speaking as Renault outlined an ambitious six-year plan to boost its revenue and earnings, and reported better than expected results for last year. In afternoon trading on Friday, Renault’s shares were up 1.4 per cent at €83.95.

Renault rescued Nissan from near collapse in 1999, and the two companies formed an alliance that involves each having an equity stake in the other.

But Renault wields de facto control over Nissan, and this led to tensions between the two companies in 2015 after Paris increased its stake in the French carmaker.

Mr Ghosn said the two companies could deepen their ties, but not until the French government sells its 19.74 per cent stake in Renault.

“The Japanese will never accept to be part of an entity where the French state will be a shareholder of Japanese assets,” he added.

Mr Ghosn described the 2015 tensions as a “soap opera”, and said his relationship with the French government was “complicated but constructive”.

His comments are consistent with private statements from several executives within the alliance, who have previously told the Financial Times that a full merger between Renault and Nissan cannot happen while the French government is a shareholder in the French carmaker.

Paris is unlikely to sell all its stake in Renault because the car industry is regarded as strategic.

The French government also holds a stake in PSA Peugeot Citroën, the country’s other major carmaker.

Renault reported net income of €3.5bn for last year, up 20 per cent compared with 2015.

The group operating margin rose from 5.2 per cent in 2015 to 6.4 per cent last year.

Renault sold a record 3.2m vehicles in 2016, and its revenue rose 13 per cent to €51.2bn last year.

Outlining its financial plan from 2017 to 2022, Renault said it aimed to boost annual revenue to €70bn at constant currencies by 2022, and raise its operating margin to 7 per cent.

Among other things, Renault is counting on sales growth in emerging markets over the next six years, and further efficiency savings through its alliance with Nissan.

Stuart Pearson, analyst at Exane BNP Paribas, said the results required to meet Renault’s new targets were “well ahead of consensus estimates”.

Renault booked €702m of foreign exchange losses last year, partly because of the fall in the value of sterling after the UK’s vote to leave the EU in June.

Mr Ghosn said Renault faced some “Brexit uncertainty”, adding that the “potential depreciation of the British pound might accelerate the expected drop of the British market”.

Renault’s Avtovaz unit, which manufactures Lada cars as well as making Renault vehicles in Russia, continued to be a drag on the French carmaker’s results last year.

However, Avtovaz’s losses narrowed from €620m in 2015 to €89m in 2016, and Renault wants the unit to be profitable by 2018.

Mr Ghosn said Russia had the potential to be a “cash machine” for Renault once the economy recovers.

Renault invested in the Russian market while other carmakers were pulling out, he added.