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France ready to cut Renault stake to shore up Nissan partnership: minister

France is ready to consider cutting its stake in Renault in the interests of consolidating the automaker's alliance with Nissan, Finance Minister Bruno Le Maire said on Saturday.

France ready to cut Renault stake to shore up Nissan partnership: minister
A Renault employee works at the automaker's factory in Maubeuge, northern France. File photo: Ludovic MARIN / AFP
He was speaking in Japan after Italian-US carmaker Fiat Chrysler pulled the plug on its proposed merger with Renault, saying negotiations had become “unreasonable” due to political resistance in Paris.
 
In an interview with AFP on the sidelines of the G20 finance ministers meeting in Japan, Le Maire said Paris might consider reducing the state's 15-percent stake in Renault if it led to a “more solid” alliance between the Japanese and French firms.
 
“We can reduce the state's stake in Renault's capital. This is not a problem as long as, at the end of the process, we have a more solid auto sector and a more solid alliance between the two great car manufacturers Nissan and Renault,” he told AFP.
 
Last week, FCA stunned the auto world with a proposed “merger of equals” with Renault that would — together with Renault's Japanese partners Nissan and Mitsubishi Motors — create a car giant spanning the globe. The combined group would have been by far the world's biggest, with total sales of some 15 million vehicles, compared to both Volkswagen and Toyota, which sell around 10.6 million apiece.
 
But the deal collapsed suddenly on Thursday, with FCA laying the blame at the door of Paris. 
 
“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA said in a statement.
 
Le Maire said Renault should concentrate on forging closer ties with its Japanese partner Nissan before seeking other alliances.
 
Things need to be done “in the right order…. First the alliance (between Nissan and Renault) should be consolidated and then consolidation (more generally) and not one before the other.”
 
“Otherwise, everything risks collapsing like a house of cards,” he warned.
 
The minister said it would be up to the bosses of Renault and Nissan to decide how to push the alliance forward as ties between the two firms have been strained after the shock arrest of former boss Carlos Ghosn.
 
Renault is pushing for a full merger between the pair but there is deep scepticism of the plan at Nissan.
 
There were varied reactions from the French unions Saturday.
 
“The government is behaving like the agent of the big shareholders, favouring short-term profit to the detriment of the interests of the country,” said Fabien Gache, of the CGT union.
 
Cutting the state's share in Renault was abandoning its responsibility in the country's auto industry, he argued.
 
Franck Daout of the CFDT union said it backed a three-way alliance between Renault, Nissan and Japan's Mitsubishi — but not one between Nissan and Renault until the alliance had reached a “safe and sustainable maturity”.

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BUSINESS

Renault shares plunge as Fiat merger talks fail

Renault shares plunged on Thursday after Italian-American carmaker Fiat Chrysler said it had withdrawn a proposal for a merger, saying it would be unable to reach an agreement with the French government.

Renault shares plunge as Fiat merger talks fail
A merger between Fiat Chrysler and Renault would have created the world's biggest carmaker. Photo: Marco Bertorello/AFP

Fiat Chrysler (FCA) “remains firmly convinced” of the interest of its offer but “political conditions do not currently exist in France to carry out such an arrangement”, it said in a statement.

French automaker Renault announced earlier that its board of directors had not reached a decision following a crunch meeting held at the request of the French state, the biggest shareholder in Renault with a 15 percent stake.

Fiat Chrysler proposed a “merger of equals” with Renault last week which was welcomed by financial markets and had been given a conditional green light by the French government, although it warned against “any haste” regarding the proposed 50/50 merger.

READ ALSO: Fiat Chrysler proposes merger with Renault


Photo: Loic Venance, Marco Bertorllo/AFP

French Finance Minister Bruno Le Maire had said a merger, which would have brought together the flagship brands as well as Alfa Romeo, Jeep, Maserati, Dacia and Lada, would be “a real opportunity for the French auto industry”. However, he had set various conditions, including that no plants be closed as part of the tie-up and that the Renault-Nissan alliance continues. 

A source close to Renault said Le Maire had asked for a board meeting next Tuesday after he returns from a trip to Japan where he will discuss the proposal with his Japanese counterpart.

At Wednesday evening's board of directors vote at Renault's headquarters near Paris, all the directors were for the merger, apart from a representative of employees affiliated with the powerful CGT union and two representatives of Nissan — a long-time Renault partner — who abstained, the source added.

The two directors appointed by Nissan, however, asked “to write in the minutes that they would say yes with a little more time”.

Fiat Chrysler said: “FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties.

“However, it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

Renault holds a 43-percent stake in Nissan, whose stocks tumbled 2.64 percent to 742.7 yen on Thursday after the withdrawal was announced. Relations in the partnership have been under strain since the arrest last November of former boss Carlos Ghosn, who is awaiting trial in Japan over charges of under-reporting his salary for years while at Nissan and using company funds for personal expenses.

The merger would have created a group worth more than €30 billion, producing 8.7 million vehicles per year. The combined mega-group — including Nissan and Mitsubishi — would be by far the world's biggest, selling some 15 million vehicles, surpassing Volkswagen and Toyota, which sell around 10.6 million each.

Foreign takeovers of major French firms are highly controversial and successive governments have sought to defend domestic industrial groups which are seen as important for their technology or jobs. 

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