Renault Sacks Its CEO, a Move That Could Rekindle Tie-Up Talks

Renault Group sacked Chief Executive Thierry Bolloré by overwhelming majority on Friday, hastily installing an interim boss in a move that could reset strained ties with alliance partner Nissan Motor Co.

The French carmaker has been in a state of virtual paralysis ever since the spectacular arrest of Bolloré’s predecessor Carlos Ghosn in Tokyo last November and an ongoing investigation in Japan into charges of financial misconduct.

Only three of the 18 directors on the board abstained in the removal of Bolloré, who reportedly had difficult relations with Nissan. The head of finance, Clotilde Delbos will take over, handling both positions in the interim. Meanwhile, the group’s chairman, former Michelin CEO Jean-Dominique Senard, will assume Bolloré’s duties as president of the joint operating unit Renault s.a.s.

Analysts said the decision to replace Bolloré without a clear successor in the wings might have been precipitated by a move on Tuesday in Japan when Nissan decided finally to fully move on from the Ghosn era. The Japanese automaker appointed a new CEO, Makoto Uchida, installing the Renault veteran as his lieutenant.

“This removal of the old guard now at Renault appears abrupt, and I wonder whether it has something of a quid pro quo nature to it,” said Philippe Houchois, automotive equity analyst at Jefferies investment bank. He believes Senard’s main task going forward will be to rebuild ties with Nissan.

When Ghosn was at the helm, Renault was seen as having a relatively shallow management bench; his sudden arrest created a leadership vacuum.

Together with its 34 percent-held associate Mitsubishi Motors, the Japanese carmaker sells almost twice as many vehicles as Renault. Nonetheless, it has long felt that the scales have been tipped against it as the two decade-old alliance was formed when Nissan was on the brink of collapse.

Under French cross-shareholding rules, the Japanese carmaker is not allowed to exercise the votes for its 15 percent stake in its partner. But should Renault unwind even a tenth of its 43.4 percent holding, Nissan would be free to finally have a say at shareholder meetings.

“This could be the precursor to selling down Renault’s stake in Nissan that is tying up too much capital,” Houchois added, pointing to Friday’s improved performance in the Renault share price. The stock ended up more than five percent on the day.

The move comes at a difficult time for Renault. The group has been the subject of takeover speculation after Italo-American rival Fiat Chrysler Automobiles (FCA) tabled a merger bid in May only to subsequently withdraw its proposal in the summer citing a lack of political support in France.

Renault then cut its revenue guidance for the year in July after first-half profits were hit by softer car demand in Europe and a hefty drop in the earnings contribution from Nissan.

Arndt Ellinghorst, Head of Global Automotive Research at Evercore ISI, said the ongoing turmoil at Renault risked throwing the carmaker further back amid an ever more competitive environment.

“It is very difficult to recognize any strategy or direction that the company is taking. Precisely at a time when automakers should be focusing their efforts on mastering the industry-wide transition, Renault appears to be pre-occupied with itself,” Ellinghorst said.

Rivals like Volkswagen Group and Daimler have committed billions to fully replacing their combustion engine line-up over the next 20 years with a range of electric cars. Thanks to Ghosn’s early bets on this technology, Renault and Nissan had early entries into this fledgling market.

VW’s vaunted ID.3 electric hatchback hits markets around June, and will take on the recently upgraded Renault Zoe, Europe’s second best-selling EV after the Tesla Model 3.

Experts warn however that the Zoe’s economics at present cannot compete with that of VW and its impressive potential to scale up production. The ID.3 is built on a group-wide architecture expected to underpin a cumulative 15 million vehicles across various models and brands over the coming years.

FCA, itself on the constant search for a partner to gain scale, now looms on the horizon again. Some speculated it was hoping to capitalize on its target’s management turmoil.

Analysts say it’s entirely possible that the Agnelli family, which founded Fiat and whose Exor investment vehicle is a major shareholder in FCA, may approach Renault’s new CEO over exploratory talks. Nevertheless, Ellinghorst argued now was not the time for the French carmaker to rekindle that courtship.

“My recommendation would not be to look at a deal with FCA, but rather to save the existing one with Nissan. That would require rebalancing the alliance—since Renault has too much influence and Nissan too little—but it would reestablish trust and help it move forward again,” he said.