Renault/Nissan: Ghosn concern
Much of the tie-up’s success is down to the Renault chief — but he won’t be around forever
Some relationships endure hard times only to break up decades later. The successful tie-up between Renault and Nissan dates back to 1999 but could yet collapse. Its architect, Renault boss Carlos Ghosn, is intent on making such an outcome impossible. His efforts to deepen the alliance have a good chance of success. But he should take his foot off the pedal when it comes to pursuing merger talks.
The current set-up is idiosyncratic. Renault has effective control of its Japanese partner through a 43 per cent shareholding. Nissan has a 15 per cent stake in Renault and no voting rights, even though it has better earnings and prospects. Its profits accounted for 54 per cent of Renault’s total in 2017. Shares trade on a multiple of 8 times next year’s earnings, compared with 5 times for Renault.
Despite the odd capital structure, the tie-up has worked. The alliance — which Mitsubishi joined when Nissan took a 34 per cent stake in 2016 — shares research, purchasing and manufacturing functions. Ambitious plans are in place to find cost cuts and less tangible benefits worth a combined €10bn a year by 2022.
Investors might think “if it ain’t broke, why fix it?” But much of the success is down to the skills of Mr Ghosn, the ultimate multiculturalist. He will not be around forever, though he is likely to stay in charge of the alliance after stepping down as Renault’s chief executive, now expected to be before 2022. Another snag with the status quo is that the unusual capital structure deters investors. Merger rumours sent Renault’s share price soaring in March.
The roadblocks are significant. Nissan has said it does not want to sacrifice independence. The French government, which has a 15 per cent stake, would resist the job losses likely to result from a merger. The biggest obstacles are cultural, as demonstrated by the disastrous DaimlerChrysler pact in 1998. A repeat should be avoided. No deal would be better than a bad deal.