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“In A Divorce, Everyone Is The Loser” – Nissan Reportedly Planning Split From Renault

Courtesy of ZeroHedge View original post here.

The long-rumored breakup of the Nissan-Renault-Mitsubishi alliance, an often-mimicked arrangement first devised by former CEO Carlos Ghosn more than 20 years ago, might finally be on the cusp of happening.

With all the added strain that Ghosn's 'Great Escape' and press conference has put on the already-tense relationship between the two partners, senior executives at Nissan are reportedly devising a contingency plan to disentangle Nissan's operation's from Renault's in preparation for a potential split. The war-gaming includes a total divide of their shared engineering and research operations, as well as changes to Nissan's board. The plans have been "ramped up" since Ghosn's great escape, the Financial Times reports.

Shareholders are probably hoping that cooler heads prevail. Because despite the mutual suspicion and Nissan's staunch opposition to a full merger, one twitter user pointed out that the break would be scuttling "years" of work, and that "in a divorce, everyone is the loser."

As Ghosn explained during last week's rambling press conference, he had proposed a new corporate structure for the alliance that would have brought Nissan and Renault together under one board, while maintaining quasi-independent operations, Ghosn denied that this was tantamount to a merger, but it's clear that the Japanese felt differently. Ghosn says senior executives inside Nissan engineered his legal downfall because they were fearful that he would lead the Japanese company to a full merger.

But suspicion has been festering on both sides since Ghosn's arrest. Renault’s new Chairman, Jean-Dominique Senard, who replaced Ghosn after his imprisonment, expressed his doubts about the partnership enduring.

Though the Japanese seem convinced that continuing to partner with the French isn't the way to go, a full split would leave both companies at a disadvantage in a world of automaker consolidation.

Both companies would probably eventually need to find new partners, according to the FT.

Despite efforts to improve relations on both sides, the partnership with Renault – which produces 10m cars a year – had become toxic, said two of the people, with many senior Nissan executives now believing the French carmaker is a drag on its Japanese counterpart.

A full split would probably force both carmakers to seek new partners in an industry grappling with falling sales and rising costs from the shift to electric vehicles. It would also leave both businesses smaller at a time when rivals are bulking up, with Fiat Chrysler and PSA merging and Volkswagen and Ford forming their own alliance.

A split would also disrupt Nissan's plans for going electric. Nissan is preparing to launch the Ariya, an all-electric sport utility vehicle, within the next three years. But the vehicle was built using a new platform co-developed with Renault. It's not clear how a split would impact that.

But after all that's happened, and all that's been reported in the press, it's difficult to imagine the two partners patching things up. Even though, by giving up their synergies and scale, one might argue that they are in violation to their fiduciary duties to their shareholders.

Renault drops as much as 2.9% in Paris, the steepest intraday decline since Nov. 12, though they've trimmed some of those losses in recent trading.


Tyler Durden

Mon, 01/13/2020 – 10:35

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