How will Nissan Motor Co. and Mitsubishi Motors Corp. deal with the proposed merger between their alliance partner Renault SA and Fiat Chrysler Automobiles NV (FCA)?
Puzzlement is spreading among Nissan and Mitsubishi Motors over the proposal that Renault formally conveyed to the Japanese automakers Wednesday. There have been whispers warning that if the merger materializes, Nissan and Mitsubishi Motors would be swallowed by the Renault-Fiat Chrysler side and could even become controlled effectively as subsidiaries.
The leaders of Nissan, Mitsubishi Motors and Renault held a meeting that started Wednesday morning at Nissan's head office building in Yokohama. According to sources, during the meeting, which ran for more than 1-1/2 hours, Renault repeatedly emphasized the necessity of the proposed business integration with FCA.
Renault Chairman Jean-Dominique Senard reportedly insisted the FCA merger would have merits for all three automakers in the Nissan-Renault-Mitsubishi Motors alliance, and that he wanted to overcome an extremely difficult period for the automobile industry through the integration.
If the proposed merger becomes reality and the alliance expands from three automakers to four, their combined annual global sales would top 15 million vehicles. This group would take a handsome lead as the world's top automaker, producing about 5 million more vehicles than its rivals Volkswagen AG and Toyota Motor Corp. Should that happen, the alliance would gain advantages in procuring parts and raising massive research and development costs.
After the meeting, Renault Chief Executive Officer Thierry Bollore appeared confident the French automaker could convince Nissan and Mitsubishi Motors to get behind the merger. Bollore told The Yomiuri Shimbun that his company had constructive discussions in a very cordial atmosphere and everything would go well.
However, Nissan and Mitsubishi Motors did not fully agree with Renault's assertions. During the meeting, Mitsubishi Motors Chairman and Chief Executive Officer Osamu Masuko also made it clear support for the deal was not a given. Masuko reportedly told Renault that "chasing greater vehicle sales was not necessarily the objective" of the tie-up.
Bolt from the blue
The proposed merger between Renault and FCA caught Nissan and Mitsubishi Motors off guard. "It was a complete surprise to us," a Nissan executive admitted.
According to FCA sources, the wheels of the proposed merger began turning in January. In April, Renault proposed a business merger with Nissan. These dates indicate Renault was also pushing ahead with behind-the-scenes negotiations with FCA, whose chairman, John Elkann, is keen on expanding the scale of the partnership. Even though this possible merger was an important matter that could sway the future of the three-way alliance, no mention of it was made to Nissan.
If the merger goes ahead, there is an increasing risk that Nissan could become a "de facto subsidiary" of Renault and FCA. This is Nissan's greatest concern.
Renault is currently Nissan's biggest shareholder and holds a 43.4 percent stake. However, Nissan has the upper hand in terms of vehicle sales, comfortably outpacing its French partner by 5.51 million vehicles to 3.88 million units. Nissan also excels in cutting-edge technologies such as those used in electric vehicles. Consequently, the automakers have maintained a power balance in which Renault dominates the capital relationship and Nissan leads in the scale of business. This balance has enabled Nissan to maintain management autonomy.
However, if Renault and FCA were to establish a merged company, the Renault side would continue to hold its share in Nissan, but the combined vehicle sales of the new partners would jump to 8.72 million units. Nissan would lose its dominant position. In that event, Nissan's clout inside the four-way alliance would be eroded, and it could lose a degree of freedom in its management. Some observers have even suggested that Renault, which is leaning on Nissan to accept the merger, may want to create such a situation.
Merger's true objective?
Concern that the merger is aimed at capturing Nissan's technological know-how is also a factor behind its hesitation to fully embrace the move.
Nissan holds the lion's share of the market for electrically operated vehicles, thanks to electric vehicles such as its Leaf. Nissan is also strong in China, the world's largest market. This makes Nissan an attractive business partner for FCA, which depends on the North American market.
An FCA source revealed that the true objective behind the merger is to "bring in Nissan." By contrast, informed Nissan sources said "there is little we can learn about new technologies from FCA." The benefits Nissan would reap from the merger would be relatively small.
The Renault-FCA merger negotiations will likely take at least one year. "I think Renault is giving priority to a merger with FCA," Nissan President and Chief Executive Officer Hiroto Saikawa said to reporters Wednesday evening.
For the time being, Renault will likely ease the pressure it was applying to Nissan regarding a merger. However, a Nissan executive was wary that this respite might be brief.
"A year from now, the merged Renault-FCA company will call for a merger with Nissan," the executive said.
It is also possible Renault and FCA will not wait a year before urging Nissan to join their merger.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
