Renault chairman faces investors as Nissan tie-up falters

Carlos Ghosn, chairman and chief executive officer of Nissan Motor Co. and Renault SA. Photographer: Patrick T. Fallon/Bloomberg

A year ago, then- Renault SA Chairman Carlos Ghosn stood before shareholders in Paris and pledged to buttress the French carmaker’s two-decade partnership with Nissan Motor Co. of Japan.

He praised the strength, solidity and pragmatic nature of their relationship and vowed to eliminate all “reasonable doubt” about the durability of the alliance.

On Wednesday, Renault shareholders will gather in the same cavernous hall in the French capital and again consider the company’s relationship with Nissan. But the circumstances have changed radically. Ghosn is gone, arrested in Tokyo and charged with financial crimes, and the alliance he nurtured is under unprecedented strain.

When Renault’s new chairman, Jean-Dominique Senard, takes the stage, he’ll be pressed to explain whether the world’s biggest auto-making alliance can survive at all, especially after the French company’s failed effort to combine with Fiat Chrysler Automobiles NV pushed the partners further apart.

“Senard is in a tricky situation,” said Denis Branche of Paris-based Phitrust, a Renault shareholder that opposed the deal with Fiat. “He made Renault’s governance healthier, but there’s still work to do. And the issue of the governance of the Renault-Nissan alliance remains.”

Renault shared have fallen about 30% in the past year, and slipped 0.5% to 55.42 euros by 9:07 a.m. in Paris trading Wednesday.

Public Shoving Match

An open struggle has broken out between the French and Japanese carmakers, and Senard’s past public gestures of goodwill toward Nissan Chief Executive Officer Hiroto Saikawa have morphed into finger-pointing. The two sides are sparring over governance changes at Nissan, an apparent tit-for-tat after it refused to support the Fiat deal.

Complicating matters even further is the mounting pressure on Saikawa ahead of Nissan’s shareholder meeting on June 25. Corporate-governance advisers Institutional Shareholder Services and Glass Lewis said investors should vote against his re-election because of his close association with Ghosn.

Asked about the reports, Saikawa said: “I believe I should follow through with my responsibilities and I hope my stance is understood.”

Read: Vote Out Nissan CEO Saikawa, Corporate Governance Advisers Say

Renault’s Senard is still smarting from the unraveling of the merger effort with Fiat. In a dramatic move, the Italian company pulled its offer after the French government — Renault’s most powerful shareholder — sought a delay in talks to persuade Nissan to explicitly support the deal. Senard has since threatened in a letter to block critical governance changes at Nissan’s shareholder meeting.

Nissan is “trying hard” to make progress in reaching a common understanding with Renault, Saikawa said in a late-night interview Monday.

Control Issues

The Fiat talks that began behind Nissan’s back have shaken the Franco-Japanese relations and added to the tensions fed by Ghosn’s arrest and the companies’ lopsided relationship. While Nissan is the largest partner in terms of vehicle output, Renault exercises more control over the Japanese automaker. Ghosn kept mutual suspicion at bay by staying at the head of both carmakers and their alliance.

Senard, like Ghosn before him, has sought to solidify the partnership with Nissan by pushing for a merger — overtures the Japanese company rebuffed.

As for a Fiat tie-up, the French government and Renault have left the door ajar for a rekindling of talks, but the strained relations with Nissan make the prospect appear remote. Senard’s comments to shareholders on the topic will be scrutinized.

At Wednesday’s meeting, Renault shareholders will be asked to ratify the appointment of Senard as a director to replace Ghosn, who was on the board for 17 years and is now under house arrest in Tokyo awaiting trial.

Shareholders will also vote on the nomination of a representative of the French government to the board along with Annette Winkler, the former head of the Daimler AG’s Smart brand of cars. Directors Cherie Blair and Philippe Lagayette will leave.

Past meetings under Ghosn were focused on the size of his salary, which the French government repeatedly criticized and sought to curb. Investors will vote on the carmaker’s decision to scrap millions of euros in payouts to him, including benefits from a non-compete agreement, stock-based compensation and a retirement salary top up.

Bloomberg