Renault And Nissan Said To Be In Discussions For A Merger

Reports indicate that Nissan Motor Co and Renault SA are in discussions with a view to merging following an alliance that has lasted for two decades. If the merger goes ahead the current alliance would end. According to sources, the negotiations are being driven by Carlos Ghosn, who is the chairman at both firms. At the moment Renault’s stake in Nissan is 43% while Nissan’s take in Renault is 15%.

A merger between the two firms would become a formidable rival to Toyota and Volkswagen as it would allow the two automakers to pool resources and compete more effectively in a sector that is undergoing rapid changes including the rise of car-sharing and ride hailing, driverless technology and new energy systems. Though the alliance between Nissan and Renault has resulted in cost savings, it has not been possible to reap full benefits due to the highly fragmented ownership structure.

The bigger the better

“Size matters in the auto industry. The concern has always primarily been the French government, and somewhat Japan, because both France and Japan like to keep their national champions,” an analyst at Tokyo’s Macquarie, Janet Lewis, said.

Per sources what is under discussion is a transaction which would see Nissan give shareholders of Renault stock in the company that will be formed. Shareholders of Nissan would also get stock in the new firm after they trade their holdings. The headquarters of the firm would be in two cities – in France as well as in Japan.

Two governments

The sources also disclosed that reaching a deal might prove very difficult. The government of France has a 15% stake in Renault and may therefore not be willing to relinquish control. Both the Japanese and French governments also have to give their approval for the deal and this could result in differences over where the resulting firm is going to be domiciled.

One of the possibilities being considered is to have the resulting company based in the Netherlands or London. Cross-Atlantic motor vehicle manufacturer Fiat Chrysler Automobiles opted for a neutral location though it maintains corporate headquarters in both the United States and Italy.

Earlier in the month it had been reported that Nissan had initiated talks with the aim of buying a bigger slice of the stake held by the government of France in Renault. And last month Ghosn indicated that he was focused on cementing the relationship between the two automakers and making the alliance ‘irreversible’.

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