Few options left for spluttering Renault-Nissan alliance
Finding a way forward without Ghosn’s steering hand will be a big test for the partnership
Shortly after Carlos Ghosn pledged to make the Renault-Nissan alliance “irreversible” this spring, an executive at the Japanese carmaker laughed off the idea that the 19-year-old partnership could collapse without its charismatic boss.
“It’s an alliance that has already overcome cultural differences,” the executive said. “Even if we are told to let go of our hands, we won’t know where to begin.”
Seven months on, the Franco-Japanese alliance is facing its biggest ever crisis following last month’s arrest of Mr Ghosn when his private jet landed at Tokyo airport and his abrupt exit as chairman of Nissan and Mitsubishi Motors, the third alliance member.
Tokyo prosecutors have alleged that Mr Ghosn, who remains chief executive of Renault, understated his pay in financial documents, while Nissan has accused him of using company expenses for personal use. Mr Ghosn, who has not been formally charged with any crime but remains in custody in Japan, denies the allegations, according to state broadcaster NHK.
For the past two decades, the Renault-Nissan alliance was perceived as one of the few successful examples in an industry scattered with ill-fated mergers that crumbled in the face of complex supply chains and diverging national cultures. Take Daimler’s disastrous 11-year partnership with Chrysler that fell apart in 2009. Suzuki also went through a four-year messy divorce from Germany’s Volkswagen.
Even if Renault and Nissan find a way forward without the steering hand of Mr Ghosn, the partnership is unlikely to stay in its current form. The deep strains the alliance is now under raise pressing questions for an industry that needs collaboration more than ever as it confronts new competition stemming from the rise of fully electric, self-driving vehicles.
At one extreme, some carmakers prefer to take full ownership of brands, as was the case with Volkswagen’s takeover of Porsche and Audi. So did China’s Geely when it purchased Volvo Cars from Ford in 2010. But for these cases to work, preserving brand identity and autonomy is critical.
Others such as Toyota and Honda have preferred loose tie-ups that augment each other’s strengths or weaknesses in particular geographies or technologies. Critics of this arrangement point to the lack of clarity on how far the collaboration can go. In Toyota’s case, the ever expanding alliance is starting to look like a shelter for smaller Japanese players — such as Subaru, Suzuki and Mazda — seeking to fend off foreign takeovers.
Then there is Fiat Chrysler, a product of Sergio Marchionne, its late Canadian-Italian chief executive who saved Italy’s Fiat from bankruptcy and merged it with ailing US carmaker Chrysler. Mike Manley, Fiat Chrysler’s new chief executive, will now be tasked with taking the group to its next phase of growth in the absence of the company’s charismatic figurehead who passed away in July.
Yet as the industry has experimented with a wide range of alliances in recent years, none has taken on the lopsided, awkward structure of the Renault-Nissan alliance.
Despite being touted as an “alliance of equals”, it was never a marriage but more a parent-child relationship, at least in terms of capital structure. Under the current terms, Renault has 43 per cent of Nissan’s shares and voting rights, compared with the Japanese group’s 15 per cent non-voting stake in Renault.
Before his arrest, Mr Ghosn had been planning a merger between Renault and Nissan, a deal the Japanese carmaker’s board opposed and was looking for ways to block.
With or without Mr Ghosn, it was increasingly clear to both companies that it was not possible to preserve the original alliance structure that was set up in 1999. The imbalance that was bearable when Renault saved Nissan from the brink of bankruptcy was no longer acceptable as the Japanese group’s annual revenue grew 60 per cent bigger than its French partner.
Even after all those years together, Mr Ghosn’s sudden departure from Nissan has illustrated how easily the bond can be tested and replaced by mistrust. The lingering uncertainty surrounding Mr Ghosn’s arrest and Nissan’s months-long internal investigation into him have made Renault executives uneasy about the way its Japanese partner handled the allegations against their boss.
Having enthusiastically promoted the so-called alliance synergies, it did not take long for Nissan employees to point out what they felt was unequal treatment that allowed Renault to benefit more from their closer links in production and sharing of components.
The Nissan-Renault debacle does not mean that the Toyota way or the VW model for alliances is the better solution.
But if the Franco-Japanese alliance is to survive, there are few options left. Either Renault takes a majority stake in Nissan or the Japanese group increases its holding in the French partner to better reflect the current power balance. Then, there is the more extreme option of the two sides releasing each other to find new partners.