Convincing the stakeholders of Renault SA and Fiat Chrysler Automobiles NV on the merits of a merger may be the easy part. The hard task is selling the deal to Renault’s alliance partner Nissan Motor Co., as well as labor groups and politicians wary of job cuts.
Jean-Dominique Senard, who’s been tapped to be chief executive officer of the combined Franco-Italian carmaker, is in Tokyo to make what may be the sales pitch of his career. In an interview on Thursday, he painted a picture of a grand auto alliance spanning the globe that will make and sell cars in almost every country, keeping people employed and churning out profits.
“It can only happen if people are open to it,” said Senard, who is in Japan this week to attend a meeting for the board overseeing the alliance between Nissan, Renault and Mitsubishi Motors Corp. He came to explain the merits of the Fiat-Renault deal to the Japanese executives, who started Wednesday’s meeting with many questions. By the end, the mood lightened and they were positive, he said.
“A closer partnership can only improve the alliance,” Senard said. Nissan, which has pushed back in the past at attempts for closer integration, “understood the message I brought here, although obviously they can’t digest it in one night,” he said.
After spending three days in Japan, Senard will return to Europe to work on bringing Fiat Chrysler and Renault together. He doesn’t anticipate any serious regulatory hurdles for the merger. Asked whether the joining of two European automakers would result in job cuts, Senard said the deal “doesn’t call for human sacrifice.”
Renault’s board is expected to give preliminary approval to the merger proposal as soon as next week, people familiar with the matter have said. Senard said on Thursday that the deal will take about a year to complete.
Behind the push to consolidate are the various headwinds the industry is facing. Sales are decelerating in the world’s biggest car markets — China, the U.S. and Europe — bringing fresh urgency to consolidate. Automakers worldwide are facing intense pressure to spend heavily on electrification and autonomous vehicles, as well as to adapt to trends such as car-sharing.
15 Million Cars
Nissan could be a key part of forging a Franco-Italian-Japanese group that could produce 15 million vehicles a year. The Yokohama-based company would complement the merged entity because of its strong presence in China, Japan and the rest of Asia, as well as its electric-car technology.
There are signs that Senard’s charm offensive is yielding some results. Following the meeting, Nissan CEO Hiroto Saikawa said he saw potential opportunities for the existing alliance in Fiat Chrysler’s merger proposal, though he plans to study the matter further. As Saikawa put it, “we don’t consider this as a minus.”
As to Senard, he said Nissan is already benefiting from the proposed merger given the increase in the Japanese carmaker’s shares on news of the deal. Nissan would also finally have more tangible influence in the alliance by gaining voting rights, he said.
Under the proposed merger of Fiat Chrysler and Renault, Nissan would get 7.5% of the combined entity. The Japanese carmaker would be able to vote with those shares, unlike with its current shares of Renault, which carry no voting rights. A merger would also dilute the French state’s control over Renault, and indirectly over Nissan, easing a concern they have had for years.
Nissan needs some good news. The company recently forecast weak operating profit and cut its dividend for the first time in a decade. Senard said Nissan currently needs to focus on its profitability and that it’s in Renault’s interest for its Japanese partner to turn itself around.
Nissan After Ghosn Needs a Makeover to Kickstart Profits Again
The alliance was destabilized late last year with the arrest in Tokyo of Carlos Ghosn, its architect and chairman, for alleged financial crimes during his time as leader of Nissan. Ghosn has denied all charges and is preparing for his trial. Although Nissan and Renault have been partners for two decades, the Japanese automaker isn’t in a position to block the deal because the merger wouldn’t breach terms of their partnership.
Senard, who replaced Ghosn as chairman of Renault and the alliance, has sought to restore stability following his predecessor’s arrest. He worked earlier this year with Nissan to craft a new governance structure to oversee the partnership, giving up concessions over board seats to assuage the Japanese firm’s concerns.
Although Renault owns 43% of Nissan, the Japanese automaker is the bigger partner by sales, yet it only owns a 15% stake in Renault, with no voting rights. Nissan sold 5.65 million vehicles last year, more than Renault’s 3.88 million units, but its profitability has been declining.
— Reed Stevenson (Bloomberg)