The scandal following Carlos Ghosn’s arrest in Japan has shaken the markets and raised questions about the continuity of the Renault-Nissan-Mitsubishi alliance. The different approaches taken by Nissan Motor Company (TYO 72010) and Groupe Renault (Euronext RNO) for action against Ghosn, coupled with alleged plans to merge both automakers have drawn attention to tensions between the companies and generated speculation about it being a corporate coup to oust Ghosn and prevent the merger.
On one hand, Nissan announced that its board had voted unanimously to separate Carlos Ghosn and Greg Kelly from their positions as Chairman of the Board and Representative Director, respectively. On the other hand, Renault’s board urged Nissan to postpone the removal of Ghosn, declared him temporarily incapacitated and appointed Thierry Bolloré as interim CEO. The company has requested that Nissan hand over details on the internal investigation that led to Ghosn’s arrest.
In 2017, the Renault-Nissan-Mitsubishi Alliance sold over 10.6 million vehicles in 200 countries under 10 brands, which, according to Ghosn, made the alliance “the number-one automotive group worldwide.” Despite this situation, sources close to Nissan cited by Financial Times say plans to merge both companies into a single automaker were advancing led by Ghosn and would meet fierce resistance by the company’s board.
At the same time, tensions between Ghosn and Nissan’s CEO Hiroto Saikawa increased as the Japanese automaker allegedly prepared for a full merger proposal and Nissan faltered due to decreasing profit margins in the US and slow growth in China.
In a press conference in Yokohama, Saikawa highlighted that Ghosn had been having a negative impact on the regular operations of Nissan and denied that the revelation of Ghosn’s alleged conduct by a whistleblower was a coup. He underlined that too much power had been concentrated at the top of the company. Similarly, Japanese newspaper Asahi Shimbun published a news piece underlining that rather than a coup, Japanese executives were fed up with Ghosn’s “lavish style, personality and various steps he had taken over the years.”
Renault’s 43-percent stake in Nissan gives it enough control over its ally to appoint top executives. On the other hand, Nissan’s 15 percent stake at Renault gives it no voting rights and no control over its French counterpart. According to Automotive News, Renault’s stake in Nissan usually accounts for the majority of its equity-accounted earnings, which could make Renault resemble “a parasite attempting to control its intrinsically stronger host.” It is likely that a full merger between Renault and Nissan would give the French automotive group even greater control of its Japanese counterpart.
An official in French President’s Emmanuel Macron’s government underlined that now is not time to contemplate changes in the power balance within the Renault-Nissan Alliance. “And they have told us this is not their intention,” he underlined.
Nissan, Renault, the French and the Japanese governments have expressed their support for the continuity of the Renault-Nissan-Mitsubishi Alliance. It is not the first time that the continuity of the auto alliance has been put to the test. According to a Reuters article, the Renault-Nissan Alliance has wrestled intermittently with full-merger plans.