Nissan shareholders losing patience with Renault

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Nissan Motor shareholders are widely expected to back Chief Executive Hiroto Saikawa at an annual general meeting on Tuesday, extending his tumultuous tenure at an automaker shaken by scandal and the loss of trust with alliance partner Renault.

Japan’s second-largest carmaker on Tuesday will hold its first annual shareholders meeting since the ouster of former Chairman Carlos Ghosn last year, and just days after Saikawa resolved a highly publicised tussle with top shareholder Renault  over Nissan’s corporate governance reforms.

Although that manoeuvring helped pull the Nissan-Renault alliance back from the brink of crisis, the former Ghosn lieutenant is now faced with the unenviable task of trying to shore up a two-decade-old partnership that many in Japan see as lopsided, deeply inequitable and shot through with mistrust on both sides.

“The most important thing is how to mitigate the damage … how to strengthen the alliance. I think both companies need to make their best efforts to overcome the mistrust,” said a person familiar with Nissan’s thinking.

The partnership hit a new low this month when Renault demanded that its chairman and chief executive be appointed to newly formed governance committees at Nissan. If not, Renault signalled it would block Nissan from adopting its new governance structure – effectively ruining months of work by an outside body.

Renault, by far the smaller of the two, owns 43.4% of Nissan after rescuing it from the brink of bankruptcy in 1999. Nissan owns 15% of the French company, but without voting rights. That unequal relationship has long been a source of friction.

There has been wide speculation that Renault’s governance move was a reprisal after Nissan had abstained from endorsing Renault’s planned merger with Fiat Chrysler Automobiles .

The stand-off was averted when Nissan agreed to appoint Renault Chairman Jean-Dominique Senard and Chief Executive Thierry Bollore to its audit and nominations committees, even as Nissan itself will not be represented on those committees.

“Almost a week was spent in negotiations (on the committees) and clearly that would damage trust toward Renault and probably between the two companies,” said the person familiar with Nissan’s thinking.

Tensions dialled down

By agreeing to Renault’s demand, Saikawa has dialled down tensions and likely won a reprieve on his two-year tenure. The embattled CEO will be re-appointed as a director if shareholders vote to approve a new 11-member board, a widely expected outcome with Renault’s backing.

“If Renault abstained on the governance reform proposals, it would put a big question mark on Saikawa’s ability to manage Nissan as its chief executive,” one Nissan source said.

Instead, Saikawa appears to have quelled internal concerns, at least for now, about his ability to manage the automaker’s relationship with Renault just as he also faces pressure to resuscitate Nissan’s flagging financial performance.

Reappointment would also see him defy opposition by proxy advisors brought about by concerns that with Saikawa in charge, the automaker would be unable to make a “clean break” from the Ghosn era. Renault CEO Bollore is also a former Ghosn ally.

In a rare public rebuke by international proxy firms against the leader of a top-tier Japanese firm, International Shareholder Services and Glass Lewis earlier this month urged Nissan shareholders to vote against reappointing Saikawa as a director.

But people at both automakers said the recent tussle has dissolved the image of unity the companies promoted only months ago, and raised questions about whether Senard and Saikawa are the right people to shake the alliance free from Ghosn’s legacy in the longer term.

“Senard has been a disappointment for us. Trust in him has fallen quite a bit,” said a second person familiar with Nissan’s thinking.

Industry experts acknowledge that a break-up of the alliance is unlikely given that operations at Nissan and Renault are so deeply intertwined – the automakers have joined forces on research and development, procurement and production, leveraging their combined scale to lower costs.

“Maybe the alliance can be salvaged, but maybe not by this group of people,” said Chris Richter, senior research analyst at brokerage CLSA.

“It seems like both of these companies have a lot to offer, but the current players just can’t get along.”

Source: Reuters, 2019