Nissan and Renault "success example" tie-up Why review?

Behind the Scenes of the Negotiation December 22nd 20:39

“Alliance is moving,”


one of the people involved whispered to us in August.

Nissan Motor and Renault of France, which have been in partnership for many years, are proceeding with negotiations behind the scenes to review their capital ties.

Led by Carlos Ghosn, the partnership between the two companies has been called a "success", but why is Nissan now trying to review it?

We approached behind the scenes of the ongoing negotiations.

(Economics Department reporter Chikara Yamane Toshin Atmosphere Airi Enoshima)

The phantom November 15th press conference

Officials:


"There is a high possibility that an announcement on November 15th will not be possible."

It's been more than three months since I started covering the negotiations in earnest.

Negotiations between the two companies, which were initially expected to reach an agreement in mid-November, showed signs of difficulty.



Renault's management team will visit Japan, and the top management of both companies will hold a joint press conference on the 15th.

I proceeded with the interview with such a schedule in mind, but the interview was canceled.

It was a moment that made me keenly aware of the difficulty of negotiating,



“Reviewing a relationship that has lasted over 20 years is still not easy .”



“Distorted capital relationship”

The key word in the negotiations is "equal position."



Why is Nissan aiming to review its capital relationship with Renault?



To understand that, it is necessary to go back in time to the “history of partnership” between the two companies.

The partnership between Nissan and Renault began in 1999.

Due to the serious slump in sales after the collapse of the bubble economy, the entire Nissan group had interest-bearing debt exceeding 2 trillion yen.



It was Renault who saved the management crisis.

Nissan has accepted an investment of more than 600 billion yen and entered its umbrella.



Carlos Ghosn, former vice president of Renault, was sent to Nissan to take the lead in the new management.



The "Nissan Revival Plan," which included the reduction of 21,000 employees throughout the group, was carried out, and the interest-bearing debt of the automobile division was reduced to zero in four years through thorough rationalization.

Nissan achieved a “V-shaped recovery”.

While the alliance with Renault helped Nissan rebuild, it also created a "distorted relationship" for Nissan in terms of capital.



In 2002, Nissan also acquired Renault shares and began to hold each other's shares, but the ratio is 43% for Renault and 15% for Nissan.



What's more, under French commercial law, shares held by Nissan in Renault do not have voting rights even if they are owned by a company in which it holds a 40% or more stake.

In terms of capital logic, it's under Renault's control.



Furthermore, after Nissan's performance recovered, Renault's performance was "supported" for many years in the form of profit based on the equity method and a large amount of dividends by Nissan, which is superior in terms of sales volume and sales scale. rice field.

For this reason, dissatisfaction with Renault was smoldering within Nissan, and the voice that ``we should break away from Renault's dominance'' grew year by year.



However, it is also true that streamlining management, such as joint purchasing of parts and sharing of chassis, has brought benefits to both companies.



Still, why is Nissan moving to review the capital relationship in search of an "equal position"?



A Nissan official said:

Nissan executive


: "When we have a good relationship with each other, there's no problem, and we're on equal footing in business, but there's no guarantee that things like the past won't happen."

Reasons for sticking to “equal position”

The "past" that this executive refers to is the event three years ago when Nissan's management independence was threatened.

The trigger was an incident involving Carlos Ghosn that happened the year before.



On November 19, 2018, Carlos Ghosn, former chairman of Nissan, was arrested by the Tokyo District Public Prosecutors Office on suspicion of violating the Financial Instruments and Exchange Act, and was dismissed from the top management position.



Renault is a company whose largest shareholder is the French government, and the French government's intentions are strongly reflected in the relationship between Nissan and Renault.

In the past, the French government has tried to influence Nissan's management through Renault.



However, in the absence of Mr. Ghosn, who had great authority, the confrontation between the French government, Renault, and Nissan intensified over the leadership of the successor chairman, etc., and in April 2019, , Renault seeks management integration with Nissan.



The relationship between the two companies deteriorated due to the unacceptable demands of Nissan, which wants to maintain its management independence.

After that, Nissan's president Makoto Uchida and Renault's CEO Luca De Meo took office, and the relationship improved under the new top management, but among Nissan executives, Renault, a major shareholder, tried to integrate management based on the logic of capital. The “past” that I did is still in my head.



While both Nissan and Renault understand the need for a partnership, the reason why Nissan sticks to an "equal position" is due to such "past feuds."

Renault negotiations accepted in the background of EV shift

But why did Renault accept negotiations to review its advantageous capital relationship?

The background is the response to the electric vehicle = EV shift that shakes the automobile industry.

In fact, in this negotiation, together with the review of the capital relationship, negotiations are also underway for a tie-up in the EV field.



In Europe, the shift to EVs is accelerating, with plans to ban the sale of new engine-powered vehicles in 2035.

Renault, whose main market is the European market, is under pressure to secure a large amount of development funds in order to strengthen its competitiveness in the EV field.



For this reason, a new company will be established to handle the EV business, with a strategy to raise funds by listing. rice field.

A Nissan executive denied the view that Renault agreed to negotiations to review capital ties in exchange for Nissan's investment in the new company, but said:

A Nissan executive


said, "The review of the capital relationship was proposed by Nissan, and it is not a return from Renault. However, it is certain that Renault wants funds."

Difficult negotiations, gap over technology patents

Negotiations between the two companies are still ongoing.



As we proceed with the interview, there is no big difference between the two companies' claims in the framework of the negotiations, such as the fact that both companies already have the same 15% investment ratio, and that Nissan will invest up to 15% in Renault's new EV company.



However, according to people familiar with the matter, negotiations are continuing on conditions such as how to reduce Renault's stake in Nissan.



Furthermore, the biggest reason why negotiations do not come to an agreement is the difference of opinion on technology patents.

At an investor briefing on November 8, Renault announced plans to spin off its EV business and also its engine vehicle business. Non-Nissan players were to participate, such as the Japanese automaker.



Renault wants to develop its business while sharing Nissan's competitive technology patents such as all-solid-state batteries and autonomous driving with new players, but Nissan will provide these technologies to third parties other than Renault. It strongly argues that doing so could lead to technology leaks, which could be disadvantageous to the company in the future.

Officials:


"We can't provide technology that we can't provide, and we can't compromise on that. We don't need to give up."

Even among Nissan's management, there is an opinion that the negotiations should be concluded quickly, but there is also strong opposition to providing important patents that could lead to technology leaks to third parties other than Renault.

Is there a strategy beyond the capital review?

Although there is no gap between the two sides in terms of the outline of the negotiations, negotiations over technology patents have not come to an agreement, and negotiations are expected to continue after the beginning of the year.



Experts familiar with the automobile industry believe that the background to the current negotiations is the type of alliances that automakers need, from the "quantity" of competing for sales volume to the shift to EVs and the development of autonomous driving. He points out that there has been a change in the “quality” to do.



On the other hand, he points out that even if the negotiations are concluded, there will still be a big problem for Nissan.

Mr. Omori


"Nissan probably decided that it was necessary to review the capital relationship for the sake of stable management, but if Renault bought back the Nissan shares held by Renault, a large amount of funds would be required, and Renault's new EV Along with investing in the company, it is necessary to provide a fair explanation to shareholders.Like Renault, which strongly promoted the shift to EVs, Nissan also needs to come up with a sustainable growth strategy that responds to the CASE era at an early stage. "

Even if Nissan achieves the "equal standing" it seeks and secures management independence, it will be difficult to survive in the automotive industry, which is undergoing a period of change, without a clear management strategy.



The outcome of the negotiations is still unpredictable, but as a reporter, I would like to ascertain what kind of management strategy Nissan will come up with in the future.

Reporter


Tsutomu Yamane


Joined in 2007


Current position after working at Matsue and Kobe stations

Economics Department Reporter


Toma Joined Atmosphere


in 2013


After working at Okinawa Bureau and Yamaguchi Bureau, current position

Economy Department Reporter


Airi Enoshima Joined


in 2017


Current position after working at the Hiroshima Bureau