Alliance Shake-Up Gives Nissan And Renault More Autonomy

It has been announced that Nissan Motor Co. NSANY has increased by 0.70 percent; Renault SA RNO has decreased by 0.77 percent; the red down-pointing triangle has lowered by 0.77%. On Monday, the two-decade-old alliance was restructured, a move that is a long-awaited decoupling that does not result in a complete divorce but gives each company more autonomy after years of tension.

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The restructuring, in which Renault has been forced to reduce its 43% stake in its Japanese partner to 15%, is a sign of a changing landscape in which alliances for the purpose of building millions of more gasoline-powered cars are not as valuable as it once was. A new type of partnership has been growing in importance as a result of the development of batteries, electric vehicle technology, and software.

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This deal includes an investment by Nissan into Renault's electric vehicle and software business, which the French automaker is seeking to take public this year along with the electric vehicle business. In addition to this, they are also considering the possibility of joint projects in Europe, India, and Latin America. The companies announced on Monday that they aimed to reach definitive agreements by the end of March and close the deal by year's end.

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In 1999, Nissan was struggling, and Renault took a stake of more than a third in it, forming a partnership with Nissan. In the late 1980s, rising executive Carlos Ghosn was sent by Renault to lead Nissan's revival. In the end, he went on to head both automakers at the same time with his forceful personality easing out differences between them.

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Nonetheless, Mr. Ghosn's arrest in Tokyo in 2018 over financial charges he denied led to his departure from the company and brought the feuding to the surface. According to executives from both sides of the negotiation, the new arrangement represents a recognition that it is better for them to operate partially apart than to work together - although the two companies will continue to hold minority stakes in each other's companies. 

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The Nissan management is in a position to run Nissan for Nissan after a period of more than two decades, a Nissan executive told reporters.

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This new setup has been described as more straightforward by Renault's Chief Executive Officer, Luca de Meo.

He told a news conference on Monday that "we are now in a position to operate like a normal business.". 

The head of an automotive consulting firm in Tokyo, Takaki Nakanishi, said the two companies would have to look for new types of partners just as other legacy automakers have begun to look for new forms of partnerships.

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Mr. Nakanishi explained that today, "surviving in the auto industry isn't simply a matter of building scale," as it was ten years ago.

Qualcomm Inc., a company that leads the field in the technology behind mobile phones, has announced that it will take a stake in Renault's electric vehicle division that will be launched by the end of the year. The French company is also working with Alphabet Inc.'s Google to develop a software-defined vehicle as part of a partnership between both companies. 

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It is predicted that Nissan is likely to look for more partnerships related to EVs and batteries, which are among its top markets, in the U.S. Despite being a pioneer of mass-market EVs in 2010 with its Leaf model, Nissan has been falling behind other automakers such as Tesla Inc. and Ford Motor Co. in the field of EVs in recent years.

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As Mr. Nakanishi put it, "The time Nissan and Renault spent fighting over the issue of power balance was a waste of time." "We are living in a world that is moving forward at such a rapid pace that Nissan's lateness is getting noticed."

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A Renault-Nissan alliance was envisioned as a way for the companies to maintain their national identities while having the ability to take advantage of global economies of scale at the same time. In the heyday of the alliance, when it added Mitsubishi Motors Corp. to its ranks, the group's combined sales of more than 10 million vehicles a year placed it among the world's largest automakers at that time.

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There was a clear division of labor between the two companies, with Nissan dominating China and the United States, Renault dominating Europe, and Mitsubishi dominating Southeast Asia.

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There was however a hidden resentment underneath the surface of Nissan concerning an unbalanced partnership between Renault and Nissan, with Renault owning a controlling stake in the Japanese car maker, which the Japanese company viewed as unfair. Nissan does not hold a voting right in Renault, despite owning 15% of the company. 

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The French car maker Renault, on the other hand, chafed at the fact that it was not receiving enough for its large stake in Nissan. Under the terms of a deal struck in 2015, Renault agreed to vote in favor of Nissan management's proposals during shareholder meetings, therefore limiting Nissan's control over the company.

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People involved in the talks said at the time that the French side made overtures about a full merger shortly after Mr. Ghosn's arrest, but they were rebuffed by the American side. Due to the fact that each company went through changes at the top during the early part of 2020 and 2021, a stalemate ensued that lasted most of 2020 and 2021. 

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It was almost a year ago that the latest discussions about a deal to restructure the alliance began, according to those involved. Over the past few months, Nissan and Renault's executives have been traveling frequently between Japan and France to hammer out the details of the agreement. 

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A general outline of the deal quickly emerged: Renault would reduce its stake so that each partner would hold 15% of the other, including the right to vote. Nissan will invest in Renault's electric vehicle business. 

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Intellectual property was one of the major sticking points between the two companies, as it was jointly developed and owned by each company. People involved in the negotiations said there were sometimes ambiguities in the rules of ownership, partly due to the fact that it was expected that the companies would merge at some point in the future.

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“We became IP Ph. D.s as a result of this discussion,” said Mr. de Meo, from Renault, who called it a very very painful conversation. He stated: “The system now works.” 

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It was also discussed in the meeting that joint projects could be set up in markets such as Argentina, Mexico, and India, among others.

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Both companies announced on Monday that they would consider collaborating on a number of new vehicle projects in India, including new SUVs that would be shared by both companies. Additionally, they are considering developing a new half-ton pickup truck, which was developed by Renault and will be shared with Nissan in Argentina. There is a possibility that Nissan will assemble a new Renault model in Mexico, making it the first Renault vehicle to be manufactured there in 20 years.

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In an event held at the Nobu Hotel London, the companies announced their plans for restructuring. People at the companies told me they had booked the same venue for Dec. 7 and canceled less than a week in advance after not concluding the deal, leaving them to foot the entire bill, people said. 

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In spite of the announcement made on Monday, several issues remain unresolved. As part of the deal, Nissan has pledged to take a 15% stake in Renault's electric vehicle company but has not said how much money it intends to invest in the company. The way in which other investors in the company will be able to access Nissan's intellectual property is also under negotiation.

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While there was no need for a formal announcement at this stage, it gave the companies' leaders a chance to put their stamp on a deal that had already been widely reported prior to the official announcement.

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There is no doubt that this is a real step forward for the alliance. It's a historical moment for Renault," said Renault Chairman Jean-Dominique Senard after the event took place.