Nissan earnings slide fuels Renault push to oust Japan carmaker boss

Renault chairman Jean-Dominique Senard and Nissan chief executive Hiroto Saikawa at a news conference in Yokohama earlier this year. Nissan revealed on Tuesday that its operating profit will likely drop another 28 per cent to "rock bottom" in the cur
Renault chairman Jean-Dominique Senard and Nissan chief executive Hiroto Saikawa at a news conference in Yokohama earlier this year. Nissan revealed on Tuesday that its operating profit will likely drop another 28 per cent to "rock bottom" in the current fiscal year.PHOTO: REUTERS

Renault chairman sees Nissan CEO, who refused to discuss merger, as obstacle to progress: Sources

PARIS • Renault is quietly pushing for a change of Nissan leadership as a prelude to merger talks, sources at both companies said, after the Japanese carmaker warned of a further earnings slide in the wake of the Carlos Ghosn scandal.

Mr Jean-Dominique Senard, who replaced Ghosn as Renault chairman in January, sees Nissan chief executive Hiroto Saikawa as an obstacle to progress, several people told Reuters.

Pressure for a tie-up - which Mr Saikawa has refused to discuss - will only intensify after Nissan revealed on Tuesday that its operating profit plunged 45 per cent in the last fiscal year and will likely drop another 28 per cent to "rock bottom" in the current one.

"Renault will continue to push for talks, citing performance as the impetus," an executive close to Mr Saikawa said after the results presentation.

These issues may come to a head at a preliminary meeting of Nissan directors being held as soon as yesterday, to prepare for a full session next Monday, three sources said.

Renault spokesman Frederic Texier and his Nissan counterpart Nick Maxfield both declined to comment.

Ghosn's arrest last November in Japan and immediate ouster by Nissan strained the partnership, as Renault resisted a full investigation of alliance finances and kept its absent leader in office as chairman and CEO for two more months.

Ghosn, who denies any wrongdoing, is awaiting trial in Tokyo on charges of financial misconduct and allegedly enriching himself at Nissan's expense.

LEAKED PLAN

After Ghosn's eventual Renault exit, Mr Senard succeeded in easing tensions with Nissan, securing a seat on its board and instituting a new alliance oversight committee under his chairmanship. But tensions resurfaced last month after a Renault-backed tie-up plan was leaked to the Japanese press.

  • 45% 

  • Plunge in Nissan's operating profit in the last fiscal year.

The proposal, confirmed by Renault sources, would place both carmakers under a new Paris-and Tokyo-listed holding company and effectively liquidate their cross-shareholdings, which are chronically undervalued by the market.

Renault owns 43.4 per cent of Nissan, whose reciprocal 15 per cent Renault holding carries no votes.

But Renault's control of Nissan is curtailed by a 2015 shareholder pact struck in response to French government moves to increase the voting rights on its own 15 per cent Renault stake.

Driven by a US sales collapse, Nissan's sharp profit decline and resulting dividend cut will wipe €130 million (S$199 million) off Renault's earnings this year, Citi predicts.

Mr Saikawa on Tuesday blamed the earnings wipe-out on "the negative legacy of our old leader" and publicly restated his long-held aversion to a tie-up of the kind proposed by Mr Senard.

"I'm very aware that his view on this matter differs from mine," Mr Saikawa said. The timing of his succession as Nissan CEO was "a matter I need to decide", he added.

BOARD TEST

Whether Mr Saikawa gets to make that call may depend on his own board, whose upcoming meeting will be a first test of his support following the dire financial disclosures.

Renault has backed off demands for immediate deal discussions but has no intention of dropping the subject definitively, people on both sides of the alliance say.

The French carmaker now privately argues that moving things forward may require "turning the page on the Saikawa era", sources close to the Renault leadership said.

Renault also wants to seat its CEO Thierry Bollore on the next Nissan board - a move seen at Nissan headquarters as provocative in the light of his former role as Ghosn's lieutenant and more recent resistance to an alliance audit.

"Pushing (Saikawa) hard is bound to cause difficulties," a senior Nissan executive said.

Some investors have been waiting years for a Renault-Nissan tie-up or break-up - either of which could unlock the value of the cross-shareholdings.

In a February note, brokerage Evercore ISI estimated the undervaluation of Renault's Nissan stake at 40 per cent, arguing for a partial sale of the holdings.

While Nissan decries the deal proposal as a distraction from necessary restructuring, Renault portrays it as an essential step towards an alliance recovery - delivering faster decision-making as well as an immediate stock-market boost.

"We're currently in a rather weakened version of an alliance," a source close to Mr Senard told Reuters. "The only people who can take pleasure in this situation are our competitors. A deeper evolution is necessary."

While exasperated with Nissan's refusal even to discuss a merger, the Renault chairman is confident the issue cannot be avoided for long, the same person said. "Creating value should be the main preoccupation of any self-respecting board, if only as a matter of fiduciary duty," he added. "No company can refuse to consider its options."

But the French carmaker's impatience could also backfire again, by helping Mr Saikawa to shore up board support, according to an executive close to Nissan's senior leadership.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 16, 2019, with the headline 'Nissan earnings slide fuels Renault push to oust Japan carmaker boss'. Print Edition | Subscribe