Since 1999, the Franco-Japanese strategic alliance has only grown stronger but due to the French government’s Florange Law, the Japanese half of the alliance, Nissan is now facing problems relating to power and voting rights.
Strategic partners since 1999 and owning eight major brands including Infinity, Dacia and Datsun, France’s Renault and Japan’s Nissan have grown from strength to strength which is quite evident from the fact that it sells more than one of every ten cars in the world. This 16 year old alliance is not any other merger or an acquisition, rather the companies joined together through a cross-shareholding agreement and it took place when Nissan was almost bankrupt in 1999 and that’s when Renault stepped in and purchased 36.8 percent of Nissan’s outstanding stock, and Nissan vowed to buy into Renault when it was financially able.
The alliance has been mutually beneficial to both the companies till date and Renault currently owns 43.4% stake which gives it full voting rights in Nissan, while Nissan owns 15% stake which gives no voting right in Renault. But, as we all know everything can’t be so smooth for such a long time and that’s exactly what has been happening in 2015. There has been a power struggle within the alliance wherein Nissan has presented a three page document to the French government, in which it calls for deep changes to the 16-year-old alliance, giving both the companies equal weight in joint decisions and a balanced cross-shareholdings of 25-35 percent.
The problems started when the French government passed the Florange Law (the government raised its stake in Renault from 15 to 19.7 percent quietly), which basically awards long-term investors holding shares of a company for over 2 years, with double voting rights. The law was strongly opposed by many companies, including the Renault-Nissan alliance. The alliance is concerned about how immensely would the new law disrupt the voting ratio and how it will affect decision making, especially for Nissan that holds only 15 percent of Renault shares.
The CEO of both the companies, Carlos Ghosn is in no mood to let the law or for that matter of fact, let anything compromise the bond or alliance between the two which he confirmed at the Tokyo Motor Show that was recently conducted Japan. He knows that both Renault and Nissan benefit each other and the 16 year old alliance assures that, it’s the best thing that could have happened for Renault and the best thing that could have happened to Nissan, because of which, the safeguarding of the alliance is of utmost importance. Everybody is simply waiting for him to plan something out to achieve this very motive and to see him make his next move.
Source – Reuters.com
