Nissan Motor says equity change in Renault alliance an option
Nissan Motor and its French automaking partner Renault SA are considering a range of options, including a more balanced equity structure, to ensure their alliance survives beyond its current leadership, the Japanese company said on Monday. Speculation about the alliance’s future, including a possible merger, has been brewing since Reuters reported earlier this year the two companies were discussing plans for a closer tie-up in which Nissan could acquire the bulk of the French state’s 15% holding in Renault.
TOKYO — Nissan Motor and its French automaking partner Renault SA are considering a range of options, including a more balanced equity structure, to ensure their alliance survives beyond its current leadership, the Japanese company said on Monday.
Speculation about the alliance’s future, including a possible merger, has been brewing since Reuters reported earlier this year the two companies were discussing plans for a closer tie- up in which Nissan could acquire the bulk of the French state’s 15% holding in Renault.
The partnership, which also includes Japan’s Mitsubishi Motors Corp. was the world’s topselling passenger vehicle maker in 2017, but as the global auto industry consolidates, the group is looking to strengthen its alliance before chairman Carlos Ghosn retires in the coming years after overseeing the partnership for nearly 20 years.
“This could take many different shapes,” Nissan Chief Executive Officer Hiroto Saikawa told reporters at a results briefing, adding a change in equity structure to create a more equal balance between the two companies was one of the options being studied.
“We need to ensure that the alliance can operate as it does now, preserving the autonomy of each company while maximizing efficiencies, in its future generations.”
While all options were on the table, Mr. Saikawa said media reports that Nissan and Renault were discussing a “full merger” were “absolutely untrue,” Mr. Ghosn has said a merger is a potential option, though not necessarily a goal.
Renault holds 43.4% of Nissan but agreed to limit formal control of its larger partner in a 2015 shareholder pact that defused a boardroom standoff with the French government. Nissan currently owns a 34% controlling stake in Mitsubishi and 15% of Renault, but no voting rights.
SAGGING US SALES
Nissan is forecasting a third straight year of lower operating profit on expectations a stronger yen and higher raw material prices will outweigh a rise in global vehicle sales to a record high.
Japan’s second-biggest automaker expects operating profit to fall 6% to ¥ 540 billion ($ 4.9 billion) in the year to March 2019, based on an assumption the yen will trade around ¥ 105 against the US dollar during the year, from around ¥111 in the year just ended.
Currency swings will result in a ¥135 billion hit to annual operating profit, pushing earnings to their lowest since the year ended March 2014 and underperforming analyst forecasts.
Operating profit fell 22.6% to ¥ 574.8 billion in the year ended March 2018, weighed by costs from a domestic compliance scandal, weakness in North America, a key market, and higher materials costs.
Nissan expects a 2.7% rise in global sales to 5.93 million vehicles in the current year, its highest ever, as an expected 11.5% increase in Chinese sales outweighs a forecast 2.7% drop in the US — which would also see China become Nissan’s biggest market again.
Nissan has seen US sales slide 6.5% so far in 2018, partly due to sluggish demand for its high-volume Altima sedan, a revamped model of which will be released later this year.
Price discounts for the Altima, the popular Rogue crossover SUV and other models were a big factor in the 30.5% drop in Nissan’s North American operating profit in the year just ended.
The automaker has roughly doubled car sales in the region since 2010, in line with a target to corner around a 10% share of the US vehicle market.
But achieving that has come at the cost of hefty discounting in the region, and Nissan has said it now plans to focus on improving profitability in North America, while also expanding sales in China, the world’s biggest car market. —