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Ghosn’s Renault Demise Opens Questions About Nissan Alliance

Ghosn’s Renault Demise Opens Questions About Nissan Alliance.

Will It Be Forced To Breakup?

The future of the Renault Nissan alliance remains in the balance after Carlos Ghosn resigned as Chairman and CEO of Renault.

Renault announced that Ghosn’s job would be split between the new chairman Jean-Dominique Senard and CEO Thierry Bolore.

Ghosn was arrested November 19 in Tokyo and quickly lost his job as Chairman of Nissan. Ghosn was subsequently charged with failing to disclose $80 million worth of compensation. Ghosn maintains his innocence.

Ghosn’s exit happened while the 20-year old Renault-Nissan alliance’s future was being questioned. Some investors think the alliance has now run its course and needs to be broken up, while others still see a long-term future for the grouping, which now also includes Mitsubishi Motors. This made the alliance the world’s biggest carmaker in 2018, with an estimated close to 11 million vehicles sold, closely followed by Volkswagen and Toyota.

In a brief statement, Renault announced the new appointments.

“The board praised the Alliance’s track record, which has enabled it to become the world’s leading automobile manufacturer,” the statement said. It gave no hint as to the future of the alliance.

New chairman Senard had a few words for reporters after the meeting.

“It’s important that this alliance remains extremely strong. It is our compulsory duty to go forward together,” Automotive News quoted him as saying.
France owns 15% of Renault.

Investor hopes
Some investors have hoped for years that the alliance, which combines Renault’s 43% stake in Nissan with the Japanese company’s non-voting 15% stake in Renault, would move to a full merger. When Ghosn’s 4-year contract was renewed, he was tasked with making the alliance with Nissan “irreversible”. But Nissan officials have said they want to increase their power in the alliance.

Ghosn’s removal was seen by some analysts as helping the alliance because its operating performance had fallen short of claimed synergies, and Renault’s share price had performed poorly compared with competitors. But others felt his removal would be a negative for the alliance because as long as he remained in charge, hope remained that Renault and Nissan would finally merge.

Nissan’s main markets are the U.S., China and Japan, while Renault is big in Europe and has an important presence in third world markets with its Dacia brand. Over the last three years, Renault profits have increased, while Nissan’s have slowed down. In 2018, Nissan’s profit margin was 3.6% and Renault’s 7.9%.

But some investors remain calm at least about Renault’s prospects.

A report from investment bank UBS published Thursday expected flat Renault auto profitability in 2019, but didn’t mention management shenanigans at all.


 

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