April 26, 2019 / 7:09 AM / 3 months ago

Renault to propose joint holding company with Nissan: source

TOKYO (Reuters) - Renault will propose a plan to create a joint holding company that would give the French carmaker and Japanese partner Nissan equal footing, a person with knowledge of the issue told Reuters.

FILE PHOTO: The logos of car manufacturers Renault and Nissan are seen in front of a common dealership of the companies in Saint-Avold, France, Jan. 15, 2019. REUTERS/Christian Hartmann

Under the proposal, both firms would nominate an equal number of directors to the new company, which would be headed by Renault Chairman Jean-Dominique Senard, according to the person, who spoke on condition of anonymity as the plan is not public.

The proposal would aim for further integration between the two automakers, the source said.

The proposal was first reported on Friday by the Nikkei business daily, which said that Renault expects to soon put a plan to Nissan under which ordinary shares in both automakers would be transferred to the new company on a balanced basis.

That would effectively dilute the French government’s Renault stake to about 7-8 percent from 15 percent.

The newly-created company would be headquartered in a third country, such as Singapore, the Nikkei and other Japanese media reported, without citing sources.

The proposal comes after the French automaker had approached Nissan with a merger idea ahead of an alliance operational meeting earlier this month, but Nissan CEO Hiroto Saikawa declined to discuss the issue with Senard, according to the Reuters source.

He added that the proposal could be modified before it was presented to Nissan.

The Financial Times newspaper reported that Nissan and the Japanese government refused to engage in merger talks with Renault and that Saikawa had refused to meet SMBC Nikko bankers appointed by the French carmaker to work on a deal.

“I have nothing to say about this. We’re not in a position to be discussing (merger issues),” Saikawa told reporters late on Friday.

“Improving our financial performance is our top priority.”

The outlook for the Renault-Nissan alliance - one of the world’s leading automaking partnerships - has clouded since the arrest in November of its main architect, Carlos Ghosn, for suspected financial misconduct.

A weakening financial performance at Nissan has also sparked concerns that the pursuit of overly ambitious sales targets under Ghosn, particularly in the United States, may have done lasting damage to the carmaker’s brand and profitability.

FORECAST SLASHED

This week, the Japanese company cut its profit forecast for the year just ended to its lowest in nearly a decade, citing weakness in U.S. operations.

Renault has long been vying for a closer merger with Nissan, which it rescued from the brink of bankruptcy two decades ago. Ghosn had been working to achieve deeper integration before his arrest in November.

While the automakers have been consolidating many of their operations over the past decade, including procurement and production, many Nissan executives have opposed an all-out merger.

Instead, Nissan has argued for a more equal footing with Renault, which holds a 43 percent stake in its bigger partner. Nissan holds a 15 percent stake in Renault.

It was unclear whether Renault would hold the casting vote in major decisions at the new company, as it did in Renault-Nissan B.V. (RNBV), a strategic management company jointly held by both companies and which oversaw operations for the partnership.

That company was mothballed last month after an internal investigation by Nissan following Ghosn’s arrest indicated that RNBV may have been involved with financial misconduct by the former chairman.

Nissan’s partnership with Mitsubishi Motors, in which it holds a 34 percent stake, would remain unchanged under the new proposal, the Nikkei said.

Reporting by Ran Kim and Naomi Tajitsu; Editing by Christopher Cushing, David Goodman and Joseph Radford

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