Macron's Ambitions Sowed the Seeds of Discord within the Renault-Nissan Alliance
2015 became a pivotal year for the Renault-Nissan alliance with the clash between the former Chief Executive Officer (CEO) of Renault and Nissan, Carlos Ghosn, and the former French Economy Minister, Emmanuel Macron, over the rebalancing of the alliance.
Macron boosted the stake of the French government in Renault from 15% to 19.7% to make sure that France was in control of Renault and therefore, the alliance with Nissan. The Florange Law introduced by former French President François Hollande effectively doubles the voting rights of the French government.
Clash between Macron and Ghosn
Emmanuel Macron fought vigorously Carlos Ghosn the moment the latter brought up the subject of opting out of the Florange Law and rebalancing the alliance towards Nissan. After 16 years of collaboration, Ghosn was aware that Nissan had outgrown Renault and that there was increasing frustration within Nissan about their lack of influence over the alliance, with the risk that Nissan might want to leave the alliance. Hence, as CEO of both Renault and Nissan, Ghosn had to manage the intricate balance between the two entities and he planned to do some rebalancing in Nissan's favor.
"Ghosn was aware that Nissan had outgrown Renault and that there was increasing frustration within Nissan about their lack of influence over the alliance."
However, Macron was in deep disagreement with Ghosn's plans. He viewed Ghosn's plans of restructuring the alliance as going against the interests of the French government. As a result, he fought tooth and nail against Ghosn, telling him that the French government would not be just a passive shareholder. In April 2015, Macron caught all parties off-guard when he instructed 'L'Agence des participations de l'Etat' (ADPE), the French state investment agency, to increase its stake in Renault to 19.7%, so as to block Ghosn's plans.
Macron wanted to keep status quo on the 1999 alliance deal with Renault having control over Nissan and preserve the interests of France. His aim was to ensure that the manufacturing plant of Renault and Nissan as well as all related jobs in France were preserved. Furthermore, he pushed Ghosn to merge both Renault and Nissan with the subsequent merged entity headquartered in France. However Ghosn thought that not only Renault and Nissan were not ready for merger, but the process would also be too complex.
In the end, this ferocious fight between Macron and Ghosn, as well as the public interference of the French government into the corporate activities of Renault and Nissan deeply fractured the trust the Japanese had in the alliance.
Hiroto Saikawa's push back against Macron
Despite being the better performer in terms of size, sales and profitability, the Japanese found themselves being sidelined with the French in all key leadership positions. While Nissan's non-voting stake in Renault has remained at 15%, Renault has increased its stake in Nissan to 43.4%. In his previous role as Chief Competitive Officer, Hiroto Saikawa voiced out his concern about the interference of the French government in Nissan and the alliance.
Against Macron's merger plans, Nissan's response came again from Hiroto Saikawa who threatened to get Nissan out of the Restated Alliance Master Agreement (RAMA) with Renault. The conditions, that Saikawa set forward, were that Renault should pare down its controlling stake in Nissan; that Nissan should have voting rights in Renault; and that Renault should not be in control of the alliance. In addition, he questioned the excessive control of Renault over the nomination of all Nissan's top leaders.
To defuse the crisis that Macron started, not only the latter eventually agreed to limit its voting rights to 18% on non strategic decisions, but also made a binding agreement that Renault would not interfere into Nissan board decisions at its shareholder meetings. Moreover, unlike previously, Nissan could also increase its stake in Renault in the event of interference from the French government as well as nullify Renault's voting rights with at least 25% stake in Renault. Furthermore, Saikawa was promoted to be co-CEO in 2016 and became the sole CEO of Nissan in the subsequent year. Lastly, in late 2017, France pared down its stake in Renault to 15%.
Macron's Political Ambitions
Being the new and young Economy Minister in 2014, Emmanuel Macron had great aspirations and wanted to adopt a more hands on approach to make change happen in France. Besides he was harboring secret plans to bid for the 2017 Presidential Elections.
While he had to retreat from the Renault-Nissan crisis he created in 2015 to focus on his bigger political plans, he did not give up on the idea of Renault taking over Nissan. It would all be within his very ambitious vision to revitalise the French economy with major global French companies like a new Renault-Nissan merged entity. Focusing on his political ambitions, he launched his party 'En Marche!' in April 2016 and by August that year, he launched his presidential campaign.
After winning the presidential elections in 2017, Macron probably had a hand in the renewal of Carlos Ghosn's contract as Chairman and CEO of Renault in 2018. In his new contract, Ghosn was given explicit objectives to merge Nissan into Renault with him eventually leading the merged entity. For Macron, a successful merger between Renault and Nissan will add into his list of achievements when he will launch his re-election campaign for the the 2022 presidential elections.
Macron and Ghosn may have taken for granted that the Japanese will eventually agree to a Renault-Nissan merger. From Macron's point of view, France via Renault is the biggest shareholder of Nissan and therefore, it has the biggest say in the future plans of both organisations.
Disrupting Macron's plans
With his nearly two decades experience leading Renault and Nissan, Carlos Ghosn was indeed the best person to lead a merger with all the necessary insights in both entities. However, familiarity breeds contempt. Ghosn thought that like his previous restructuring of Nissan, he could push through his plans. Despite all his years in Nissan, he may have greatly underestimated the frustration and resistance from the Japanese side.
From the public confrontation between Macron and Ghosn over the future of Renault and Nissan in 2015, the Japanese perceived that despite being the bigger partner in the alliance, their views did not carry much weight and that time was ticking for the fate of Nissan. Moreover, in spite of the Japanese disapproval for a merger, the renewal of Ghosn's contract was made with the explicit aim of merging Nissan into Renault. This undermined further their trust in Ghosn. Besides, this just reaffirmed their belief that France, Renault and Ghosn were mainly acting in their own interests.
That is why a secret investigation was carried out by a small team of Nissan officials with the help of former Japanese government prosecutors, once Ghosn's malfeasance within Nissan was discovered. The Japanese are usually very sensitive about maintaining the decorum in their business practices and avoid washing dirty linen in public. However, it can be inferred from the public take down of Ghosn at Haneda Airport as well as the public splashing of the details of his malpractices that the Japanese wanted to have maximum impact and send an implicit message about their disagreement to Renault and Macron.
While Nissan Motor and Mitsubishi Motors promptly removed Ghosn from their board, France initially tried to deny the allegations and hold on to Ghosn as Renault's Chairman and CEO. However, with the high profile arrest of Ghosn in Japan and with the Japanese media releasing constantly details and evidence on the allegations of Ghosn's misconduct within Nissan, Macron had to let him go and instruct Renault's board to find a new chairman and CEO.
"...with the high profile arrest of Ghosn in Japan... Macron had to let him go and instruct Renault's board to find a new chairman and CEO."
Salvaging the Renault-Nissan Alliance
Despite the scandal, Macron urged the Japanese Prime Minister Shinzo Abe to agree to a Renault-Nissan merger. The Japanese government rebuked him by saying that whatever decisions to be made should be left to Nissan shareholders and that they would not intrude into Nissan's internal affairs. Since France agreed previously to limit its voting rights and that it would not interfere into Nissan, it did not have much room to manoeuvre. It looks like Macron's plan to merge Renault and Nissan is currently dead in the water, unless major changes are made to rebalance the alliance in Nissan's favor.
Leaving the Renault-Nissan-Mitsubishi alliance will be indeed very costly for all parties. In 2017, the synergies generated within the alliance were reported to be €5.7 billion. Hence it will not make any sense for any alliance members to leave. From the current crisis, the only way forward is to salvage the alliance. However, Macron's new pointman in Nissan, Jean-Dominique Senard, will indeed have a major challenge to rebuild the trust with Nissan and its employees. In the end, Renault and Nissan may not have any other alternative but to work together for the future.
(published June 2019)
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