French automaker Renault SA is drawing up proposals to relinquish some power over its Japanese partner Nissan Motor (NSANY), sources said, and is drumming up support ahead of a likely boardroom clash with the French government.
Renault (RNSDF) has been on a collision course with its biggest shareholder since April, when French Economy Minister Emmanuel Macron raised the government’s stake in the carmaker, intending to tighten its control over one of the country’s largest employers.
Under a law passed earlier this year, the state it would get double voting rights as a long-term shareholder.
The trouble with that, from the perspective of the company, is that it would destroy the balance of power between the two that was laid out when they agreed their strategic partnership in 1999, in what was effectively a rescue of Nissan by Renault. Renault has a 43.3% stake in the Japanese company.
Under the combined leadership of Chief Executive Carlos Ghosn, the Renault-Nissan alliance has become the world’s fourth biggest carmaker by sales. But Nissan has outgrown the French company and now leads in a number of areas such as engineering projects.
Management at both companies want to shield Nissan from possible increased French influence in the future. With Paris deaf to such concerns, Renault’s management is now preparing to make good on threats to weaken its grip on Nissan, people with knowledge of the matter said.
“There’s nothing that comes close to an agreement,” a source close to the alliance said. “It’s as if the government wants to find out whether it’s a bluff.”
Macron has warned Ghosn against making any moves to loosen Renault’s control of Nissan, or its leadership of the alliance.
“Any unraveling or weakening of the links between the two companies cannot be a solution,” he said in a newspaper interview published on Sunday. Renault-Nissan declined to comment.
Macron, a former investment banker turned Socialist minister spent 1.2 billion euros ($1.3 billion) of public money to raise France’s stake in Renault to 19.7% to block a Ghosn proposal for the company to opt-out of the law that gives long-term shareholders double voting rights.
Even after the government’s holding is pared back to 15% as planned, France will command a blocking minority when the so-called Florange law takes effect at the end of March.
The minister on Sunday reiterated a compromise offer, first reported by Reuters, to limit the exercise of its additional voting rights to strategic questions.
But Renault’s proposal is likely to go much further, sources said, neutralizing its control in Nissan with a binding pledge not to interfere in management–as demanded by the Japanese carmaker on Nov. 30–along with restrictions on government votes.
As a safeguard, Nissan wants to be authorized to increase its 15% percent stake in Renault if the promise is broken. If the holding reaches 25% percent, Renault could in turn lose the votes on its Nissan shares under Japanese law.
In a sign that Macron may have given some ground, French officials privately acknowledge that any last-minute compromise would likely require a Renault-Nissan deal adjusting the relationship defined in a 2002 alliance master agreement.
Besides Ghosn, the 19-member Renault board consists of 10 independent directors, who have so far backed the CEO, four workers’ representatives, two Nissan appointees and two French government officials.
Macron has demanded that Ghosn and both Nissan appointees abstain from voting to avoid conflicts of interest, sources say.
The independents, including Danone Chairman Franck Riboud and Total’s Thierry Desmarest, have also been criticized by French officials for betraying Renault – a charge they rebuffed in an unusual group statement last month.
