French, Japan auto alliance to endure despite giving up Ghosn

FOR years, France’s Renault and Japan’s Nissan struggled to make money in the global auto business.

Then came Carlos Ghosn, a Renault executive who helped to orchestrate an unprecedented transcontinental alliance, combining parts of both companies to share engineering and technology costs.

Now Ghosn’s arrest in Japan for alleged financial improprieties at Nissan could put the nearly 20-year-old alliance in jeopardy.

Ghosn, 64, born in Brazil, schooled in France and of Lebanese heritage, is set to be ousted later this week from his spot as Nissan chairman.

He could also lose his roles as CEO and chairman of Renault, threatening the alliance formed in 1999, that’s now selling more than 10 million automobiles a year.

He’s been “the glue that holds Renault and Nissan together,” Bernstein analyst Max Warburton wrote in a note to investors.

In a telephone call, French Finance Minister Bruno Le Maire and his Japanese counterpart Hiroshige Seko reaffirmed “the strong support” of their governments to the alliance.

Nissan has said it will dismiss Ghosn after he was arrested in Japan on Monday for allegedly abusing company funds and misreporting his income.

That opens up a leadership void at the entire alliance.

Nissan CEO Hiroto Saikawa has publicly resisted the idea of an outright merger. But he reiterated Nissan’s commitment to the venture, while a Renault statement expressed “dedication to the defense of Renault’s interest in the alliance.”

Nissan and Renault now share technology, and they save money by jointly purchasing components.

While there could be some scrutiny of the relationships between the companies, they’re so intertwined now that cutting them apart would be difficult, said Kelley Blue Book analyst Michelle Krebs.

“I would not predict its demise,” Krebs said.

She said she sees further consolidation in an industry that faces unprecedented research costs for autonomous and electric vehicles, while at the same time continuing to develop cars and trucks powered by internal combustion engines.

“The last thing one of the world’s biggest automakers needs is the disruption caused by an investigation into the behavior of a man who has towered over the global auto sector,” said Michael Hewson, chief market analyst at CMC Markets in London.

The brash Ghosn was once viewed as a savior in the auto business with the ability to turn around the two struggling companies. In 2006 he even proposed an alliance with General Motors.

But Warburton wrote that Ghosn’s reputation has been declining for years.

Krebs said Nissan never could meet Ghosn’s goal of 10 percent US market share even though it has relied on “bad behavior” such as heavy discounts and sales to rental car companies.