Nissan and Renault\'s Alliance Faces Biggest Test Yet---Without Its Architect

Nissan and Renault’s Alliance Faces Biggest Test Yet—Without Its Architect

Global auto alliance is due to hold its first board meeting since the arrest of Carlos Ghosn

Renault’s Carlos Ghosn won’t be present at a critical meeting between the French car maker and partner Nissan on Thursday after the executive was arrested in Japan. Photo: denis balibouse/Reuters

PARIS—Executives from Renault SA RNO -0.82% and Nissan Motor Co. NSANY -1.81% are set to convene Thursday for a meeting that will test the solidity of their two-decade alliance—and whether the smaller French company can keep the upper hand.

It will be the first board meeting for the alliance since police arrested Renault Chief Executive Carlos Ghosn in Japan on suspicion of financial misconduct, and Nissan removed him as its chairman.

Thursday’s gathering is to be the first between the companies in two decades without any input from Mr. Ghosn. He built their alliance into an automotive behemoth with himself at its nexus—and empowered to cast the tiebreaking vote in the Dutch joint venture that manages cooperation among alliance members.

Mr. Ghosn, who remains in jail as Japanese authorities investigate, hasn’t been charged with any crime. He has denied wrongdoing, according to Japanese public broadcaster NHK.

The dramatic arrest of celebrity-CEO Carlos Ghosn is rocking the automotive industry. After he was accused in Japan of underreporting his pay, Nissan offered one explanation: The man had too much power. Photo composite: Sharon Shi

People close to Nissan say Mr. Ghosn’s ouster is an opportunity to rebalance power with Renault. People close to Renault said the company would oppose any attempts to fundamentally reshape their partnership. Attendees at Thursday’s meeting in Amsterdam—which typically includes not just board members but executives and operational managers from both companies—will determine whether they can get back to the day-to-day business of managing a global supply chain after the partnership was shaken to its core.

Underscoring the tensions between the two companies, Renault was waiting early this week for confirmation on whether Nissan CEO Hiroto Saikawa and other top Japanese executives planned to fly to the Netherlands, or join the meeting by teleconference, before deciding whether to send its own top brass, according to people close to the French car maker. As of Tuesday, both Mr. Saikawa and Renault’s deputy CEO, Thierry Bollore, appeared unlikely to travel to Amsterdam, people close to both companies said.

When asked about the meeting, Mr. Saikawa, a protégé of Mr. Ghosn who denounced his former mentor last week, told reporters outside his Tokyo home he expected business as usual.

“It’s just a normal meeting,” Mr. Saikawa said.

For now, Renault has asked managers further down the chain of command to attend in person to get customary face time with their Japanese counterparts, according to a person close to the French car maker. “It’s the first time top teams and operational teams will meet and speak after the events of last week,” the person said. “It’s an important human meeting.”

The alliance dates to 1999, when Renault bailed out a then-struggling Nissan, eventually ending up with a 43% stake in the Japanese company. That culminated in a relationship in which the French company is the senior partner, despite selling 35% fewer vehicles in 2017. Nissan also owns a 15% stake in Renault, but has no voting rights.

As part of the alliance, the companies pool technology, basic components, and research and development, creating global scale that allows them to better compete with giants like Volkswagen AG , Toyota Motor Corp. and General Motors Co.

Mr. Ghosn serves as the alliance’s chairman and CEO, a role he still has at Renault and once held as well at Nissan. Mr. Ghosn stepped down as CEO of Nissan in 2017 but remained chairman until his removal last week.

A Dutch entity, Renault-Nissan BV, has since 2002 managed much of the partnership. It owns subsidiaries responsible for tasks including joint purchasing and information-technology services. Its expenses, which totaled more than €150 million ($170 million) in 2016, include management fees for executives, services provided to alliance partners and payments to outside consultants, according to the Dutch filings.

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Most meetings of the alliance are focused on the companies’ operations, and how to further cut costs or share functions, according to a former board member. Company filings show the Dutch entity has updated its bylaws three times, in part reflecting Mr. Ghosn’s job changes within the alliance, while ensuring he maintained a deciding vote.

On paper, Renault’s effective control of the entity looks difficult to dislodge. Renault-Nissan’s board is evenly split between directors nominated by each company. But according to the alliance’s bylaws, Renault’s directors alone can name or remove the entity’s chairman and chief executive, who has a tiebreaking vote whenever there is a deadlock. Mr. Bollore will serve as a proxy for Mr. Ghosn at Thursday’s meeting, keeping Renault’s votes intact, people close to the French auto maker said.

But a rigid application of the alliance’s rules risks alienating Nissan when Renault and the French government are seeking to preserve the alliance. Mr. Saikawa, who serves as Renault-Nissan’s vice chairman, is expected to chair Thursday’s meeting in Mr. Ghosn’s absence, giving him a measure of control over how it proceeds.

Complicating matters, Nissan told Renault’s board last week that the company may have uncovered evidence of wrongdoing involving the Dutch entity, according to people familiar with the matter. Renault board members said that any investigation would need to be carried out by both companies, the people said.

Thursday’s meeting was planned long before Mr. Ghosn’s Nov. 19 arrest in Japan. Prosecutors say they suspect Mr. Ghosn understated his compensation by a total of about $44 million, people familiar with the matter said. Osamu Masuko, the CEO of Mitsubishi Motors, which is the newest addition to the alliance, said he would attend via videoconference, though he isn’t a member of the Renault-Nissan BV board.

The French state, which owns 15% of Renault, has long said it wanted Mr. Ghosn to change the alliance’s legal structure to make it irreversible. Mr. Ghosn has warned that tinkering with the architecture of the alliance poses unforeseen risks because of the various approvals needed to make changes.

On Tuesday, France’s finance and economy minister, Bruno Le Maire, told French TV he hoped at the alliance would be strengthened but the balance of power and cross-shareholdings that exist today between Renault and Nissan “were right.”

Mr. Le Maire also said the bylaws of the alliance that allow Renault to name the entity’s CEO and chairman “must not change.” Mr. Saikawa, Nissan’s CEO, said last week that the alliance had invested too much authority in one person and he wanted “a more sustainable structure.”

Write to Nick Kostov at Nick.Kostov@wsj.com and Sam Schechner at sam.schechner@wsj.com

Appeared in the November 28, 2018, print edition as 'Ouster Stirs Doubts on Nissan-Renault Ties.'