Renault, Nissan near landmark deal to reshape alliance

Renault is in the final stages of concluding a deal this week to reduce its stake in Japanese partner Nissan and reshape their two-decades-old alliance, a person familiar with the negotiations said.

The pact would allow the French carmaker to proceed with a planned carve-out of its electric vehicle business. Both sides are set to sign a non-binding agreement after details were largely finalised late last week, said the person, who asked not to be identified because the plans aren’t public. 

Although an event is being planned in Tokyo on November 15 to announce the deal, discussions are ongoing and a final agreement could be delayed, people familiar with the talks said. Shares of Renault rose as much as 3.2% in morning trading on Euronext.

Under the plan, the French carmaker will reduce its ownership of Nissan over time to 15% from the current 43%. In return, Nissan will invest $500m (roughly R9,060,000,000) to $750m (roughly R13,593,015,000) for a stake of about 15% in Renault’s electric-vehicle business, code-named Ampere, which is being split from the combustion engine and powertrain operations by Renault CEO Luca de Meo. 

The change in ownership would alleviate an imbalance that’s been a source of friction for years. Although Renault has an outsized stake in Nissan, the Japanese carmaker sold 4-million vehicles in 2021 versus the French manufacturer’s 2.7-million. The 2018 arrest of Carlos Ghosn, who was sent in to run the partnership when Renault rescued Nissan two decades ago, planted the early seeds of the changes in the alliance. The former chair and CEO escaped Japan in December 2019 and is in Lebanon.

Nissan plans to start repatriating cash from China for the deal soon after the non-binding agreement is signed, one person said. The Japanese carmaker is willing to walk away should Renault seek different terms or the French government, a key Renault investor, seek to block the plan, the person said. 

Representatives for Renault and Nissan declined to comment.

Speaking on Tuesday on the sidelines of the Paris Automotive Summit, French finance minister Bruno Le Maire said he was in talks with De Meo and was about to meet with him.

“We want the guarantee that the decisions taken by Renault will preserve the alliance, which is in the interest of Renault,” he said.

Executives have discussed the carve-out plan since February as Renault seeks to shore up its future in the shifting European car market, the company’s mainstay. Discussions intensified earlier this month when Nissan CEO Makoto Uchida and COO Ashwani Gupta met in Japan with De Meo and Francois Provost, senior vice president of international development and partnerships.

Carmakers are taking unprecedented steps to navigate the EV transformation. Ford in March said it will separate the fast-growing EV and software business from the combustion engine assets that will focus on cutting costs and streamlining operations. Last year, Daimler ended more than a century of making cars and trucks under one roof, with Mercedes-Benz Group AG and Daimler Truck Holding AG now listed separately.

Under Renault’s plans, an entity dedicated to EVs and software would be based in France and employ about 10,000 people by 2023. A second entity, a partnership with China’s Zhejiang Geely Holding Group, would focus on internal combustion and hybrid powertrains, and be based outside France, also with a staff of about 10,000. 

One potential snag could be the Japanese government’s concern over the transfer of combustion powertrain technology to Aurobay, a joint venture between Geely and Volvo Car AB, and other investors, the person said.

Executives from Renault and Nissan aim to formally unveil the agreement next month, the people said. All board members from Renault, Nissan and Mitsubishi Motors Corp, the junior member of the three-way alliance, will attend the event in Tokyo, the people said.

Before then, Renault is scheduled to speak to investors at its capital markets day scheduled for November 8, when De Meo is expected to give an update on financial targets as well as on the plan to split the two businesses.

The talks with Nissan on “several” projects are “complex” and will “take time,” De Meo told reporters on October 13 at a press conference on Renault’s recycling plans. He said he was optimistic an agreement with Nissan could be found in coming weeks on some of the projects under discussion.

“We are working with the right frame of mind,” De Meo said about the talks.

“We have some interesting leads.”

The agreement includes provisions preventing Renault from selling shares to a competitor or to an activist investor, the person said. Renault has no plans to sell right away because it would have to take an impairment by selling at current prices, and will seek an orderly disposal of stock. 

One option being discussed is placing shares in a trust and giving Nissan the right of first refusal for any stock offered for sale, according to the person familiar with the talks.

Renault’s voting rights in Nissan will also be capped immediately when the deal goes into effect. The changes will require a new operating agreement between the companies, the person said.

“We talk every day,” Renault chair Jean-Dominique Senard said on Monday at the Paris car show when asked about current discussions. The carmaker is “extremely close and transparent with the French government” about the alliance talks.

More stories like this are available on bloomberg.com