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Renault-Nissan Alliance Future Clouds After Ghosn Arrest

Renault-Nissan Alliance Future Clouds After Ghosn Arrest.

The Renault-Nissan Alliance’s future is under the microscope after the arrest of its leader Carlos Ghosn in Japan.

Some investors think it might broken up, while others still see a long-term future for the alliance.

Reports Tuesday that France, which owns 15% of Renault, had followed Nissan in firing Ghosn as CEO, turned out to be a call from the government to review his position. Meanwhile reports questioned the action against Ghosn, saying it was unlikely he would have been responsible for filing reports about his pay. This would have been done by the company and its auditors.

This must be frustrating to say the least for Ghosn, who led the move in 1999 for Renault to buy ailing Nissan, and set up the alliance which is currently the world’s biggest car maker, if you throw in recently acquired Mitsubishi Motors. The alliance sold 10.6 million vehicles last year. Ghosn also led the industry’s move to electrification with the Nissan Leaf and Renault Zoe.

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 earlier this year, he was tasked with making the alliance with Nissan “irreversible”.

According to investment researcher Jefferies, Ghosn’s removal would help the alliance because so far its operating performance had fallen short of claimed synergies, and Renault’s share price had performed poorly compared with competitors.

Positive
“We see Carlos Ghosn potentially leaving the Alliance as a positive,” said Jefferies analyst Philippe Houchois.

Both Nissan and Renault need the alliance to continue in some form, he said.

“The Alliance ……. cannot just rely on “personal legitimacy” and needs to be based on clear mutual interests and the ability to generate and retain cost synergies. With a number of potential positions to fill, we would expect separate CEO/Chair to ensure accountability,” Houchois said.

The Wall Street Journal thinks Ghosn’s arrest bodes ill for the alliance.

“The arrest of Carlos Ghosn does more than bring down one of the titans of the auto industry. It effectively dashes hopes that the Renault-Nissan-Mitsubishi Alliance that he created could be merged into a conventional car company,” Heard on the Street columnist Stephen Wilmot said.

Wilmot also wondered about the legitimacy of the Japanese actions.

“One glaring question is why Mr Ghosn, rather than Nissan, would be responsible for stating his pay at all. The company and its auditors would normally be responsible for an incorrect stock-exchange filing, not the employee,” Wilmot said.

Renault shares were down another 5% Tuesday at 56.35 euros, after losing close to 10% the previous day, as investors interpreted the controversy as meaning the French government is now less likely to sell its 15% stake, a pre-requisite of a full merger.

French finance minister Bruno Le Maire said on Tuesday the government was seeking interim governance for Renault because Ghosn was no longer in a position to lead the carmaker, according to the Financial Times.

“We have not asked for the formal departure of Mr Ghosn from the board of directors for a reason that is simple, we have no proof,” Le Maire said, according to the FT. 


 

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