France pushed Nissan for a merger but was rebuffed
The Japanese car maker wanted a bigger stake in Renault
PARIS—The
French government engaged directly in discussions with Nissan Motor Co. early in 2018 about the possibility of a full-blown merger with Renault SA, according to a person familiar with the deliberations.
The government’s proposal, and Nissan’s stiff opposition to the idea, demonstrate the stark differences between the French and Japanese sides over the future of a nearly 20-year-old carmaking alliance between Nissan and Renault in the months before the surprise arrest of Carlos Ghosn. Mr. Ghosn forged that alliance and served as chairman of both before his detention by Japanese police in November.
Nissan and Renault executives, along with the French government, which is a major Renault shareholder, had been openly discussing for months how to reform the alliance’s structure. The debate had flared before Nissan executives started to investigate Mr. Ghosn—a probe that would ultimately lead to his arrest. Those discussions had heightened tensions between the two sides, which then spilled out into the open when Mr. Ghosn was arrested.
Nissan made clear its opposition to the merger idea at an
April meeting attended by Hari Nada, a senior Nissan executive, according to the person familiar with the deliberations. The Wall Street Journal reported in December that Mr. Nada played a pivotal role in the investigation that landed Mr. Ghosn in prison.
Renault lawyers, in a letter also first reported by the Journal, have recently questioned whether Mr. Nada faced a conflict of interest in remaining the point of contact between Renault and Nissan’s senior management, while also being involved in the origins of the probe into Mr. Ghosn.
Nissan declined to comment and declined to make Mr. Nada available for comment.
The discussions about a merger included an April 23 meeting between Mr. Nada, a Nissan senior vice president in charge of the company’s chief executive office and legal department; Martin Vial, who heads the French state’s holding company; and Mouna Sepehri, a senior executive and board member at Renault, according to the person familiar with the deliberations.
Mr. Vial didn’t respond to a request for comment. The Agence des Participations de l’État, the state holding company, declined to comment. Ms. Sepehri didn’t respond to a request for comment.
The meeting came days after the holding company sent a memo to Nissan laying out the benefits of a merger between Renault and Nissan for the companies’ shareholders, according to this person.
At the meeting, Mr. Nada said the Japanese car maker felt the plan laid out in the memo didn’t sufficiently factor in the views of Nissan shareholders, and that Nissan’s preference was instead for a “rebalancing” of the partnership, the person said.
A spokesman for Renault declined to comment.
The Journal has previously reported that Mr. Nada was part of a small circle of Nissan executives who initially started looking closely at Mr. Ghosn’s deferred compensation and use of company funds.
That eventually morphed into an internal probe at Nissan. It was then shared informally with Japanese prosecutors, who decided they had a criminal case.
Mr. Ghosn has been detained since Nov. 19. Tokyo prosecutors have charged him with underreporting his compensation in eight years of Nissan financial statements and with causing Nissan to pay the company of a Saudi Arabian friend who helped him with a personal financial problem.
Mr. Ghosn has said he is innocent of the charges. He says he kept a record at Nissan of how much he thought he was worth, but describes it as a hypothetical calculation that didn’t bind Nissan to pay him anything beyond his publicly reported compensation. He says Nissan received valuable services from the Saudi company and paid it appropriately.
In a recent interview with Japanese newspaper Nikkei, he blamed his arrest and the charges against him on “a plot and treason”.
At the April meeting where a merger was discussed, Mr. Nada said that the type of rebalancing of the alliance that Nissan was interested in discussing would involve Renault reducing its stake in Nissan, and Nissan increasing its stake in Renault, so that both companies had voting rights in the other, according to the person familiar with the deliberations.
Currently, Renault owns about 43% of Nissan, while Nissan owns 15% of Renault through shares that lack voting rights. That is a legacy of Renault’s investment in Nissan while it was teetering financially. Today, Renault is the smaller company in terms of sales.
Mr. Nada told his French counterparts that Nissan would also want the rebalancing to include altering the contracts between the two companies so that neither side could attempt to establish control of the other, the person said. Mr. Nada said Nissan also wanted the French state to sell its more than 15% stake in Renault as part of the rebalancing, the person said.
Lastly, Mr. Nada said Nissan was prepared to discuss building a new structure to ensure an effective succession to the leadership team of the alliance and maintain the partnership’s advantages for the car makers, the person said.
Mr. Vial, who is one of the French state’s representatives on the Renault board, said that Mr. Nada’s demands wouldn’t be acceptable to Renault because they would involve the French car maker selling down its stake in Nissan without making sufficient progress toward a merger, according to the person familiar with the deliberations.