Ghosn’s arrest casts doubt on Renault-Nissan alliance future

November 20, 2018 – For years, France’s Renault and Japan’s Nissan struggled to make money in the global auto business.

Then came Carlos Ghosn, a Renault executive who helped to orchestrate an unprecedented transcontinental alliance, combining parts of both companies to share engineering and technology costs.

Now Ghosn’s arrest in Japan for alleged financial improprieties at Nissan could put the nearly 20-year-old alliance in jeopardy.

Ghosn, 64, born in Brazil, schooled in France and of Lebanese heritage, is set to be ousted this week from his spot as Nissan chairman. He could also lose his roles as CEO and chairman of Renault, threatening the alliance formed in 1999 that’s now selling more than 10 million automobiles a year.

He’s been “the glue that holds Renault and Nissan together,” says Bernstein analyst Max Warburton in a note to investors. “It is hard not to conclude that there may be a gulf opening up between Renault and Nissan.”

Nissan has said it will dismiss Ghosn after he was arrested for allegedly abusing company funds and misreporting his income. That opens up a leadership void at the entire alliance, for which Ghosn officially still serves as CEO and chairman.

Ghosn added Mitsubishi to the alliance two years ago after the tiny automaker was caught in a gas-mileage cheating scandal. He had even floated the idea of a full merger between the three companies.

Nissan CEO Hiroto Saikawa has publicly resisted the idea of an outright merger. So with Ghosn out at Nissan and probably Renault as well, the companies are unlikely to get any closer.

The companies now share technology, and they save money by jointly purchasing components.

While there could be some scrutiny of the relationships between the companies, they’re so intertwined now that cutting them apart would be difficult, says Kelley Blue Book analyst Michelle Krebs. “I would not predict its demise,” Krebs said of the alliance.

She says she sees further consolidation in an industry that faces unprecedented research costs for autonomous and electric vehicles, while at the same time continuing to develop cars and trucks powered by internal combustion engines.

Nissan’s board is to meet Thursday to consider Ghosn’s fate. Renault, where Ghosn is also CEO, said its board will hold an emergency meeting soon, and experts say it is unlikely that he will be able to stay at the company or the broader alliance.

The brash Ghosn was once viewed as a saviour in the auto business with the ability to turn around the two struggling companies. In 2006 he even proposed an alliance with global giant General Motors.

Bernstein’s Warburton writes that Ghosn’s once-mighty reputation has been declining for years, while Krebs says Nissan never could meet Ghosn’s goal of 10 per cent U.S. market share even though it has relied on “bad behaviour” such as heavy discounts and sales to rental car companies.

Saikawa reiterated Nissan’s commitment to the venture, while a Renault statement expressed “dedication to the defence of Renault’s interest in the alliance.”

News from © The Canadian Press Enterprises 2018