FCAU Fiat Chrysler Automobiles NV

By Alastair Gale and 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 (June 10, 2019).

FUKUOKA, Japan -- Tensions over a busted merger between Fiat Chrysler Automobiles NV and Renault SA, and lingering hostilities between Renault and its Japanese alliance partner Nissan Motor Co., spilled out into the open this weekend -- heightening a five-way game of chicken among two governments and three of the world's biggest auto makers.

In Japan for a Group of 20 meeting, French Finance Minister Bruno Le Maire ruled out a quick resumption of talks over Fiat Chrysler's aborted offer to merge with France's Renault. He said the auto industry needs further consolidation, but Renault and Nissan, its longtime partner, should strengthen their alliance before being involved in any new merger moves.

Renault, meanwhile, signaled it won't back governance changes proposed by Nissan in the wake of the arrest and ouster of Carlos Ghosn, the former chairman of both Nissan and Renault, because of worries they might dilute Renault's influence at Nissan, according to people familiar with the matter.

Fiat Chrysler walked away from a proposal to merge with Renault last week, after the French government said it needed more time to pave the way for such a combination with Nissan. Mr. Le Maire said in Japan that protecting the two-decade partnership between Renault and Nissan was the priority for the French government, Renault's largest shareholder.

"We all know that because of the technological transformations taking place, in particular with electric and connected vehicles, there will be a need for industrial consolidation," Mr. Le Maire said at a press conference following a Group of 20 meeting of global financial leaders in Japan on Sunday. "But this can only be the second step, after the reinforcement of the alliance."

Nissan has proposed a set of governance overhauls to be voted on by directors at its June 25 annual general meeting. The Japanese car maker has for months been examining its governance in the wake of Mr. Ghosn's arrest for alleged financial misconduct, which he denies. As part of its revisions, Nissan wants to set up board committees responsible for remuneration and audit. Under its current system, the chairman has almost sole power to determine director and executive pay.

Renault and Nissan currently share technology and vehicle parts as part of a three-way tie-up with Mitsubishi Motors Corp. Renault owns 43.4% of Nissan, while Nissan owns 15% of Renault.

In a letter to Nissan Chief Executive Hiroto Saikawa on Saturday, Renault Chairman Jean-Dominique Senard wrote that the French car maker supports Nissan's objective to strengthen its governance. But revisions "should not serve as a tool directed or used against Nissan's largest shareholder," Mr. Senard wrote, according to people familiar with the contents of the letter. Mr. Senard is a Nissan board member.

The proposal to overhaul governance needs a two-thirds majority to pass, meaning Renault must support it. People familiar with Mr. Senard's thinking said the letter merely indicated Renault's first intention and its position could change before Nissan's shareholding meeting.

Mr. Le Maire has raised the prospect of the French government lowering its 15% stake in Renault as part of a shareholding reorganization, but he said that would only be a possibility in the longer term.

Mr. Le Maire heads to Tokyo on Monday, where he will meet Japanese Finance Minister Taro Aso. He said he has no plans to meet with Nissan's Mr. Saikawa, and it was up to the heads of each company to discuss how to bolster their alliance.

"All options can be envisaged, and it's up to Renault and Nissan to make proposals," he said.

Write to Alastair Gale at alastair.gale@wsj.com and Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

June 10, 2019 02:47 ET (06:47 GMT)

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