Saving the Renault-Nissan-Mitsubishi Alliance
Nissan could put auto alliance on a more equal footing by buying more Renault stock
The Renault-Nissan-Mitsubishi Alliance is worth saving, and a more equal arrangement of crossshareholdings is a necessary condition. Renault’s battered stock could even get a short-term boost as Nissan jostles for power.
Nissan on Thursday voted to remove Chairman Carlos Ghosn, linchpin of the alliance, from its board. The outcome, widely expected following allegations that Mr. Ghosn misreported his pay and misused company funds, casts doubt over the future of an unusual car-industry giant. Partners since 1999, Renault and Nissan share cross-shareholdings and a range of operations, from purchasing to engineering and production. Mitsubishi joined the club following a 2016 crisis and is now being integrated.
It is hard to pin a realistic value on the alliance. Mr. Ghosn made much of “synergies” based in part on estimating what costs might be incurred if the companies took separate roads. If these are to be believed, Nissan and Renault would have been barely profitable
last year without the alliance. More likely, the modeling exaggerates the benefits.
Still, the alliance is worth preserving, above all as a buffer against the power of Silicon Valley. Most car companies are having to spend an increasing share of sales on research and development to deliver electric vehicles and self-driving technology. Sharing those costs across three companies makes sense.
The alliance’s rivals are collaborating.
Honda last month gave up its own self-driving project and signed a deal with General Motors’s Cruise, one of the few credible driverless-car developers. Volkswagen and Ford are also looking for ways to share costs, particularly on new technologies.
It would be odd if the most established automotive partnership broke down just as others are sprouting.
Both sides have said they want to maintain the alliance, but there
is resistance to further integration at Nissan. Renault seems to have derived the lion’s share of benefits in recent years, likely reflecting the unequal shareholding structure: Renault owns 43% of Nissan, with votes, while Nissan owns 15% of Renault, without votes.
If the alliance is to survive, this needs to change. One option would be for the French government to sell its 15% stake in Renault to Nissan. But President Emmanuel Macron’s popularity is ebbing, so any move that could be interpreted as a threat to French jobs seems unlikely.
Travis Lundy, who publishes on investment-research platform Smartkarma, thinks Nissan could use Ghosn’s absence from the board to buy a slug of Renault shares. If its stake exceeded 25%, this would have the crucial effect of neutralizing Renault’s stake in Nissan. This is for the same reason that Nissan’s own stake in Renault doesn’t carry voting rights. Under many countries’ stock-exchange rules, Company A cannot vote in meetings of Company B if Company B owns a big share of Company A; otherwise management could use the crossshareholding to entrench its own interests.
Buying Renault stock would be an aggressive move by Nissan, but is consistent with the tone Chief Executive Hiroto Saikawa has struck this week. Renault shares are down 8% since the scandal broke and are changing hands at a rock-bottom valuation. With a motivated buyer potentially in the market, it may be worth betting on a rebound.