Auto Alliance Shapes Post-Ghosn Era -- WSJ

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03/13/2019 | 07:47 am
Carlos Ghosn


Leaders of Renault, Nissan, Mitsubishi Motors agree on new operating board



By Sean McLain




YOKOHAMA, Japan -- The heads of Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp. on Tuesday overhauled the leadership structure of their auto-making alliance, looking for a fresh start in the wake of the arrest and dismissal of Carlos Ghosn.



The companies said the old structure -- which Mr. Ghosn created as alliance chairman -- was unwieldy and will set up an operating board to replace it.



"In the existing setup we spent a lot of time, you know, to report to many, many layers of each of our companies, and this creates viscosity," said Renault Chief Executive Thierry Bolloré. "And our clear will is to ensure we get rid of that viscosity."



The new board will meet every month in Paris or Tokyo and its chairman will be Renault's new chairman, Jean-Dominique Senard. Its other members will be the chief executives of the three auto makers. The body replaces two Netherlands-based subsidiaries, one of which linked Nissan and Renault, and the other Nissan and Mitsubishi.



The Wall Street Journal reported the outline of the board on Monday.



Tuesday's announcement marked an easing of tensions that arose between Renault and Nissan after the arrest of Mr. Ghosn in Tokyo on Nov. 19. The surprise move was prompted by a secret investigation of his conduct by Nissan executives. Mr. Ghosn is charged with violating two Japanese laws, one governing corporate financial disclosures and the other barring corporate executives from abusing their positions for personal gain. He has said he is innocent and called the charges against him meritless.



The two companies also reached a deal on the status of Mr. Senard at Nissan. Renault said it wouldn't seek to make him chairman of the Japanese auto maker in place of Mr. Ghosn; instead, the companies said they planned to make him Nissan vice chairman after putting his nomination as director to a shareholder vote in April.



Under the rules governing the alliance between Renault and Nissan, the French auto maker can nominate one top Nissan executive, a power that was used to install Mr. Ghosn as chairman in the past. Nissan had indicated it would prefer that role no longer be held by a Renault executive.



In December, Renault took Nissan to task in a series of letters over the way Nissan investigated Mr. Ghosn. Nissan sought to reassure its partner by sharing the results of its investigation directly with Renault's board but was rebuffed.



At a joint news conference Tuesday in Yokohama, where Nissan is based, Nissan Chief Executive Hiroto Saikawa said the new structure solved many of his complaints about the alliance. Now, Mr. Saikawa said, decisions would be made through consensus, with each alliance member having an equal voice. Mr. Saikawa had complained that Mr. Ghosn wielded too much power as the head of both Renault and Nissan.



A spokesman for Mr. Ghosn, who was released on bail last week, didn't have any immediate comment.



Mr. Ghosn remains a Nissan director and had sought to attend a company board meeting on Tuesday ahead of the news conference -- a request denied by a Tokyo court. Junichiro Hironaka, Mr. Ghosn's lead attorney, said his client was concerned about Nissan. "Leadership is needed, and that's what he is worried about," Mr. Hironaka said.



Mr. Senard said replacing a primary decision maker with a four-person board would improve cooperation. Previously, Mr. Ghosn had outsize voting power under the rules governing the Netherlands-based entity linking Renault and Nissan.



Renault has two representatives on the new board, compared to one each from Nissan and Mitsubishi. Mr. Senard declined to detail how disagreements would be settled. "I believe the consensus-based structure is better than any rules about voting," he said.



The board plans to create a new structure for alliance projects, such as joint development of vehicles. The companies will set up teams that will report directly to the new board; under a structure that Mr. Ghosn had begun to establish early last year such teams reported to him alone as chairman of the alliance.



Nissan is awaiting proposals due this month from outside advisers on changes to its corporate governance. Mr. Saikawa said Renault has agreed to respect any changes Nissan makes to its governance.



Analysts see Tuesday's announcement as a symbolic step for partners who need to rebuild trust.



Many analysts have expressed doubts in the past about the actual benefits that the companies gain from their partnership, pointing to their relatively low profit margins. Renault and Nissan had an operating profit margin of 6.3% and 4.8%, respectively, last fiscal year. Toyota Motor Corp. had an operating margin of 8.2%.



The most contentious issue facing the alliance is the unbalanced cross-shareholding structure, where Renault owns 43.4% of Nissan, but Nissan holds only 15% of Renault. Also, Renault has three seats on Nissan's board, while Nissan has two seats at Renault's and no voting rights. The companies said the issue was not on their recent agenda.



River Davis contributed to this article.



Write to Sean McLain at sean.mclain@wsj.com





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