NSANY Nissan Motor Company Ltd (PK)

By Nick Kostov 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 17, 2018).

PARIS -- Renault SA is pressing Nissan Motor Co. to open a discussion into the balance of power atop the Japanese auto maker after prosecutors charged its former chairman, Carlos Ghosn, and the Japanese firm with financial misconduct.

Thierry Bolloré, deputy CEO of Renault, which owns 43.4% of Nissan, sent a letter dated Dec. 14 to Nissan CEO Hiroto Saikawa urging him to call a shareholder meeting "as promptly as practicable" that would allow a discussion of Renault's representation on Nissan's nine-member board and within the ranks of its top managers.

Nissan's board, which meets Monday, has been without a chairman since Japanese prosecutors, acting on a tip from Nissan, arrested Mr. Ghosn on suspicion of financial misconduct. Nissan then ousted Mr. Ghosn as chairman.

Nissan's "indictment creates significant risks to Renault, as Nissan's largest shareholder, and to the stability of our industrial alliance," Mr. Bolloré wrote in the letter. "We believe a shareholder forum would be the best manner of addressing these matters in an open and transparent fashion."

Renault hasn't received a response from Mr. Saikawa, according to a person familiar with the matter. Nissan didn't respond to requests for comment.

The letter is a sign of how the arrest of Mr. Ghosn -- once the glue that held the companies together -- is testing the strength of the world's largest auto-making alliance.

On Dec. 10, Tokyo prosecutors charged Nissan alongside Mr. Ghosn on allegations of reporting only about half of the executive's compensation at the Japanese company during the five years ended in March 2015. Prosecutors said his true compensation added up to the equivalent of about $87 million over the period, but the company's financial reports said it was $44 million.

Mr. Ghosn, who was arrested in Tokyo on Nov. 19 and remains in jail, has denied wrongdoing, according to Japanese public broadcaster NHK. The office of his lead Japanese lawyer, Motonari Otsuru, has declined a request for comment. Nissan has apologized for what it called "false disclosures" and said it would improve its governance.

Publicly, Renault and Nissan have said they want to continue the partnership, which allows the auto makers to share technology and platforms. Behind the scenes, however, employees at both companies say mistrust is growing.

Renault bailed out Nissan in the late 1990s, but since then Nissan has grown to become the larger of the two companies. That has led Nissan executives to privately grouse over Renault's reliance on the Japanese auto maker to pad its bottom line.

A shareholder meeting would allow Renault to renew its push to appoint a successor to Mr. Ghosn on Nissan's board.

In a November letter to Renault's board, Nissan's board said it wouldn't allow Renault to name a successor because Mr. Ghosn remains one of Renault's three directors and, in Nissan's view, Renault isn't entitled to any further representation on the Nissan board.

Mr. Bolloré pushed back in the letter dated Dec. 14, writing that a shareholder meeting "would allow for appropriate disclosure and discussion of governance and other matters, including the Renault appointees on the Nissan board and in senior management."

In an earlier letter Mr. Bolloré sent to Mr. Saikawa on Dec. 13, the French executive asked Nissan to provide "full and prompt disclosure" of what it knows about the Japanese car maker's indictment and called for an assessment of how it will affect its business and senior management. Nissan's indictment, Mr. Bolloré wrote, "is deeply troubling to us, and it raises significant concerns with respect to issues of corporate integrity, governance and internal controls."

Mr. Ghosn also remains chairman and CEO of Renault, though his management duties have been delegated to Mr. Bolloré while Mr. Ghosn remains in jail.

Under the rules that govern their alliance, Renault can urge Nissan's board to call an "extraordinary" shareholder meeting, but must stop short of formally calling one itself. Mr. Saikawa can now put Renault's suggestion to the Nissan board, or choose to ignore it. If Mr. Saikawa does relay the request, there is no certainty that it will pass.

Dieter Zetsche, chairman of German auto maker Daimler AG, which holds 3.3% of Nissan, is copied on Mr. Bolloré's Dec. 14 letter. Mr. Zetsche has indicated he supports Renault's call for a meeting of Nissan shareholders, according to a person familiar with the matter. A Daimler spokesman declined to comment.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

December 17, 2018 02:47 ET (07:47 GMT)

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