French Government Upgrades Stakes in Battle With Nissan Over Renault

PARIS—The French government opposes significant changes in the cross-shareholding system that underpin Renault SA's alliance with Nissan Motors Co., Prime Minister Manuel Valls said, escalating the battle between the French car maker's biggest shareholders.

Earlier this week the French government entered talks with the Japanese car maker after Nissan complained about the balance of cross-shareholdings as well as the government's growing influence over Renault.

"This alliance between Renault and Nissan must endure as it is and must remain combative," Mr. Valls said Sunday in a radio interview. He also poured cold water on media reports saying the government was seeking a full tie-up between the companies.

"What we want is to keep the alliance, we don't want a merger."

Boardroom tensions have been mounting since French Economy Minister Emmanuel Macron increased the government's stake in Renault to nearly 20% earlier this year from 15%, making it the largest shareholder in the company. The move also ensured the application of a newly passed French law that doubles the voting rights of the state and other long-term investors.

Despite the escalating conflict between the French government and Renault Chief Executive Carlos Ghosn , Mr. Valls said he supports the management at both Renault and Nissan.

The two companies have been in a technological and capital partnership since 1999, making it one of the most enduring tie-ups in the sector. Renault holds a 43.4% stake in the Japanese company while Nissan owns 15% of Renault. Under French cross-shareholding rules, however, Nissan has no voting rights in Renault.

In recent years, Nissan has emerged as the larger and more profitable of the two companies, making about two-thirds of the combined vehicle sales.

The government has pledged to lower its stake in Renault to 15%. However, the government's decision to enforce the double-voting-right rule at Renault means the state will have more power over the carmaker even when lowering its stake back to 15%.

With the double-voting rights, the government currently holds 32.8% of the total votes at the company.

That voting power especially grates on Nissan. On Friday, Nissan Chief Competitive Officer Hiroto Saikawa reiterated that Nissan supports a one-share, one-vote structure.

Nissan's board is considering whether to increase its stake in Renault to rebalance voting power within the Franco-Japanese alliance, according to people familiar with the matter.

Write to Inti Landauro at inti.landauro@wsj.com

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(END) Dow Jones Newswires

November 08, 2015 20:45 ET (01:45 GMT)

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