There is excitement in the business press around the
dealings that the state of France has with car maker Renault, and the impact
this could be having on the alliance of Renault and Nissan. The story starts
with complicated maneuvers by the Economy Minister (this is France, after all),
which are interesting enough to mention, but I will soon get to the alliance
issue.
The start of the excitement is that the French government
made a change in the stock voting rights late last year that benefits long-term
investors, because they get double voting rights, so double the power, if they
have held the shares for two years or more. But there is more to the law; it
can also be used to favor French or other European shareholders over others,
and specifically it lets the French state get double voting rights on its
shares. That is a big power grab in a nation that has large state shareholding
of many companies. The French government has assured managers and other owners
that their intentions are purely beneficial and they do not intend to
discriminate against others. The very existence of the law, and past French Economy
Minister behavior against firms, place that assurance very much in doubt.
But enough legal issues, over to alliances. The Renault –
Nissan alliance is famous as one of few very successful cross-border alliances
of large firms. It started more or less as a rescue of Nissan, which was in
bigger trouble than Renault when it was initiated, though neither firm was
healthy. As a result, both firms own a portion of each other, but Renault has
voting shares over Nissan but not the other way around. And what started as a
rescue led to very significant success and growth. Now Nissan has double the
car sales of Renault.
The Renault CEO Carlos Ghosn has made big personal
investments in making the alliance work, and has drawn much credit from its
success. He reacted quickly against the new law through seeking to make a
special Renault exemption from it (this is legal), as well as speaking publicly
against the law. No doubt he is doing this because Nissan enjoys their relation
with Renault but do not trust the French state. Indeed, he has been supported by his board of
directors, as well as from the Nissan board of directors. He has until recently
looked like he would be able to get a majority of Renault stockholders to vote
for the exception, as he is required to do.
And now I need to bring the French state maneuvers back into
the story. The Economy Minister Emmanuel Macron has arranged to buy a
substantial share of Renault stock and to have options to sell them after the
shareholder meeting. Translation: he is using taxpayer money to buy the votes
necessary to stop Ghosn at the shareholder meeting. This is nearly certain to
work, making France an even more important shareholder in Renault as intended.
What about the alliance, then? Well, it is going to be interesting.
As long as France does not intervene much, it is likely that it will go on as
before because Renault and Nissan are still useful for each other. But if there
are problems things could change dramatically because Nissan actually needs
Renault much less now than it used before. The main problem would be that
Renault owns so much of Nissan that getting away from Renault would be hard. It is easy to see ways that this change in power will cause problems, and much harder to see any benefits to the alliance -- or to France.
Stacy Meichtry, Jason
Chow and Sam Schechner. 2015. France Outflanks, Outrages Renault’s Ghosn. Wall
Street Journal, April 27 2015.
Greve, Henrich R., Timothy J. Rowley, and
Andrew Shipilov. 2013. Network Advantage:
How to Unlock Value from your Alliances and Partnerships. Jossey-Bass.
