Nissan-Renault deal is dead in all but name

Even after a relationship is dead, couples often go through the motions of remaining in a marriage. That’s the best way to characterise what’s left of the alliance between Renault SA and Nissan Motor Co.
Renault must sell down its 43.4 percent stake in its Japanese partner to 5 percent-10 percent and both sides should “invest in new ventures,” Nissan’s Senior Vice President Hari Nada wrote in an e-mail to colleagues, saying this was the view of independent director Masakazu Toyoda, the Wall Street Journal reported at the weekend. In Toyoda’s view, the two sides should come up with some sort of joint venture in order to show that the alliance isn’t dead, giving Renault Chairman Jean-Dominique Senard the room to unwind the cross-shareholdings that underpin the relationship, the Journal reported.
To judge by the picture this paints of internal discussions within Nissan, the Japanese company is only interested in maintaining the appearance of an alliance with Renault and its 15 percent shareholder, the French government. Making a joint commitment to reaffirm a bond isn’t uncommon for people in a failing relationship, but it’s no way to run a business.
If Nissan is sincerely committed to a joint venture, the first thing it should do is identify a strategic opportunity, work out what synergies it would bring, and find a way to operate it. Forming a JV just to get your partner to agree to the terms of a divorce puts your employees’ careers at the mercy of these corporate maneuverings.
For those at Renault most committed to the logic of the merger with Fiat Chrysler Automobiles NV that was declared dead in June, this might count as good news. Senard has publicly talked down the prospect of the tie-up being renewed, but this suggests that Renault has been looking for ways to revive the alliance
behind the scenes.
The risk for Nissan is that by turning away from its European partnership it will leave itself too small to manage the vast capital expenditures and research and development costs necessary as the global car industry seeks to reverse slumping sales and manage the transition to electric vehicles and greater automation.
Ghosn’s pursuit of volume growth at any cost is one reason why Nissan is now plagued with overcapacity and facing drastic job cuts. But the vision he was pursuing before his arrest — of a company as transnational as he is, headquartered in the Netherlands and with operations all over the world, and not especially beholden to either the Japanese or French governments — is now unlikely ever to materialise.
That’s a tragedy. A Renault-Nissan alliance free to pursue profitable growth in the interests of the business as a whole, rather than being turned into the plaything of nationalist interests, is the likeliest way for the two companies and their workforces to prosper. If management in Paris and Yokohama are quietly giving up on that future, both companies may live to regret it.
A marriage where neither partner is committed is the worst of all worlds. If separation is out of the question, Nissan and Renault need to find a way to make this relationship work.

—Bloomberg