Renault Weighs Truce With French State

The board of French car maker Renault SA is set to meet on Friday to weigh options to resolve a long-running feud with the French government that has threatened its alliance with Japanese partner Nissan Motor Co.

Carlos Ghosn, chief executive at both Renault and Nissan, told managers last week he was confident a deal among the three parties would be reached and could be ready to be presented as early as Friday, according to a person familiar with the matter. A solution could come in the form of an accord between Renault and the French state, and a revision to the 2002 master agreement that governs the alliance between Renault and Nissan, the person added.

The feud began earlier this year when the French government raised its stake in Renault to 19.7% from 15% to ensure the application of a new French law that doubles the voting rights of long-term investors. It pledged at the time to lower its stake back to 15%, but has yet to do so.

The state's double-voting rights has been particularly vexing to Renault's alliance partner, Nissan. Renault owns a 44% stake in Nissan. And though Nissan also holds 15% in Renault, French cross-shareholding rules nullify Nissan's voting rights.

A compromise to the power struggle could lead to a rebalance of one of the auto industry's most successful tie-ups.

The alliance dates back to 1999 when Renault first invested in the formerly money-losing Nissan and was formalized in 2002. But since then, Nissan has become far larger and more profitable than its French partner, comprising about two-thirds of combined vehicle sales.

A compromise would likely include some restrictions on France's voting power on certain subjects. French Economy Minister Emmanuel Macron told a French newspaper on Dec. 7 he was willing to limit the state's double-voting rights on certain subjects, though he wouldn't elaborate on which ones.

Nissan, which has stated publicly its fears about French government meddling, has sought to limit France and Renault's influence in its own affairs.

The Japanese auto maker dispatched two senior executives to negotiate, alongside Renault, with the French state. Nissan is seeking the right to increase its shareholdings in Renault, which it is currently prevented from doing under the terms of the alliance.

A person familiar with Nissan said the Japanese company was seeking the right to increase its shareholdings in Renault as a deterrent against meddling by the French company and the government.

"It's not that we would increase the stake immediately," the person said. "Our purpose isn't to fight [the French government]. But if there are situations under which Nissan would be threatened, then Nissan wants to have that option."

While the two companies share production, research and development and purchasing among other functions, Renault has the upper hand in the tie-up and can choose the top executives at Nissan, people familiar with the matter say.

France supports a full merger of the two auto makers, according to a person familiar with the French government's thinking.

However, Mr. Ghosn has repeatedly opposed a closer union of the two and has long maintained that the Renault and Nissan alliance is successful because they remain separate companies, pointing out that most auto mergers have ended with huge losses and an eventual split-up.

Write to Jason Chow at jason.chow@wsj.com and Yoko Kubota at yoko.kubota@wsj.com

(END) Dow Jones Newswires

December 10, 2015 13:25 ET (18:25 GMT)

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