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Maybe Carlos Ghosn Wasn't So Bad After All

Lionel Laurent

(Bloomberg Opinion) -- Is the Renault-Nissan Alliance stronger than the man who led it for two decades?

The omens don’t look good. The downfall of Carlos Ghosn over allegations of financial misconduct has opened up a Pandora’s Box of Franco-Japanese political hostility, grudges and pressure tactics – supposedly all in the name of “strengthening” the 20-year alliance. For all Ghosn’s flaws and delusions of grandeur, he did manage to balance the interests of two prickly G7 economies in the highly sensitive auto sector (at least until he came a cropper). His successors will do well to last a fraction as long.

On the French side, Renault SA’s chairman Jean-Dominique Senard was parachuted in to rescue relations with Nissan Motor Corp Ltd. after Ghosn’s arrest. But he’s failing to live up to his billing as a veteran captain of industry and diplomat’s son. First he tried to rush his Japanese counterparts into accepting a full Renault-Nissan merger. Then he tried and failed to get Nissan’s blessing for a tie-up with Fiat Chrysler Automobiles NV, an embarrassment for the French president Emmanuel Macron. Not a great start.

Having failed to win the Japanese around with blandishments, an increasingly desperate-looking Senard has reached for the stick. He’s now threatening to use Renault’s 43% stake in Nissan to block the latter’s attempt to shake up its corporate governance. This looks like more of a tactical play than any genuine desire to stall much-needed reforms at the Japanese carmaker, which is only now waking up to the need for separate remuneration, audit and nomination committees. But that won’t make it any more palatable to Tokyo.

Optically, it looks a lot like a Renault attempt to get more control over the new committees. Even if it works in forcing Nissan to the negotiating table to sort out other issues, it’s a mightily clumsy about-turn for a chairman who said in April that the Japanese would not respond well to “humiliation” tactics.

Still, Ghosn’s replacement at Nissan, CEO Hiroto Saikawa, is hardly covering himself in glory. Like Senard, he seems incapable of wielding power without looking weak. Nissan owns just 15% of Renault, so it’s at a disadvantage in terms of shareholdings. But if Saikawa was trying to take back control with his ousting of Ghosn and the governance changes, the limits have been laid bare this week.

Nissan will have an incredibly tough time pushing these reforms through without Renault’s support, a painful reminder of Saikawa’s constraints. The Japanese carmaker’s poor financial performance isn’t helping. Former Nissan executive Greg Kelly is also ratcheting up the pressure by accusing Saikawa of approving Ghosn’s pay structure.

Only now do we realize Ghosn’s skill – and maybe his good fortune – when it came to balancing the needs of two countries with a history of national pride and state interference in industry. Renault has a very big stake in Nissan, yes, but not majority control. In retrospect it’s remarkable that Ghosn was able to push a sickly Nissan into adopting truly revolutionary changes after the creation of the alliance: An end to cozy deals with historical suppliers, massive job cuts, and the ceding of control to non-Japanese executives.

To be fair to Senard and Saikawa, Ghosn’s personal empire-building and his ability to hoover up all the top jobs probably helped – at one point he was running Renault and Nissan simultaneously, as well as their alliance. Arguably too much power was concentrated in the hands of one man. But he’s clearly left a void, which has been filled by squabbling. 

In response to Parisian meddling, Nissan has woken up to its own ability to pressure the French even with a smaller stake. These power games are very risky for both firms given the economic benefits offered by the alliance, something that’s doubly important now that the auto industry is facing the epochal challenge of the death of the combustion engine and the possible decline of car ownership.

Bankers are still confident that the partnership will survive. But the distrust that is setting in, as well as the lack of leadership, portends a long-term weakening.

To contact the author of this story: Lionel Laurent at llaurent2@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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