The sudden fall of Carlos Ghosn seems destined to trigger a power struggle between Renault SA and Nissan Motor Co. on the alliance he oversaw for two decades.
While both sides say they are committed to the partnership, they are already preparing for a battle to control the world's largest alliance of cars, people familiar with their discussions said. And with the governments of France and Japan also interested in defending their own interests, it could turn into one of the most difficult corporate slugfests of recent times.
Ghosn's arrest in Japan over alleged financial misconduct opens the door for Nissan to try to rebalance the alliance as Renault prepares to resist any attempt to undermine its position, the people said. At first, Renault was the strongest partner, but over the years circumstances have changed: Nissan now sells a third more cars annually and makes more profit.
"The crisis has just begun for the alliance," said Kenneth Courtis, president of Starfort Investment Holdings, an investment, private equity and commodity group. "All the problematic things now go to the surface."
This story is based on discussions with more than half a dozen individuals close to the companies who asked not to be identified discussing particular matters. A Renault representative declined to comment, while a Nissan official did not immediately return a call for comments.
Nissan's board toppled Ghosn as president on Thursday, three days after his arrest, a surprising slump for an executive widely credited for rescuing the automaker from the collapse in 1999. With Ghosn leaving, executive director Hiroto Saikawa is already planning a review of the report. alliance to make it more equitable for the Japanese automaker, people familiar with the plans said. Nissan was also angered by the French government's meddling in the alliance, one person said.
The French company will resist any sudden change to reshape the relationship, other family members said. Possible scenarios include hiring another partner, such as Daimler AG of Germany, to strengthen the European arm of the alliance, two people said, although such plans are not currently under discussion. Daimler and Renault-Nissan began working together eight years ago on small cars and delivery vans. Three-way cooperation is supported by a cross-shareholding of 3.1%.
France can also use an executive with credibility on both sides, such as Toyota Motor executive vice president Didier Leroy to act as an intermediary, one person said. The Frenchman and former executive of Renault, 60, is a well-regarded figure in Japan. Leroy declined to comment.
An alliance meeting is scheduled for next week in Amsterdam, which may include Daimler, said one person with knowledge of the matter.
Renault, with the French state as its largest shareholder, has a 43 percent stake in Nissan, which in turn owns only 15 percent of Renault, with no voting rights. This imbalance has caused resentment at Nissan for years.
Lately, the structure has become increasingly controversial in Japan due to Nissan's improved performance. Nissan sold about 5.8 million cars last year – compared with only 3.7 million for Renault – and provides links to China, where Renault has only a small presence, and the US, where the automaker French is absent.
Under Japanese corporate law, Renault's voting rights could be canceled if Nissan increased its stake to more than 25% in the French automaker. Under French rules, if Renault reduces its stake in Nissan to less than 40%, it will help the Japanese automaker get the right to vote in the French company.
Prior to his arrest this week, Ghosn was busy working on plans to make the alliance "permanent," possibly through a merger, as reported by Bloomberg in March. This push was facing resistance from within Nissan, including Saikawa, his ex-protégé.
Both sides agree that the future of the partnership is more important than Ghosn's fate, which remains in the same prison as those condemned to the death of the Japanese cult that perpetrated the attack on the Tokyo subway in 1995, many of which were performed only a few months ago. He has not commented publicly since his arrest.
The charges against him were precise and serious in nature, a French government official close to President Emmanuel Macron said. He also said the state is willing to hold long-term talks on how to adjust the shareholders pact to deal with tensions, but not now and certainly not until the current governance situation is clarified. Renault has replaced Ghosn as CEO temporarily pending more information.
Macron accompanied the show around Ghosn prison on Monday through headlines, as well as his finance minister and those responsible for state involvement in Renault, according to two authorities with knowledge of the matter. The French head of state did not receive any warning that the problem was emerging for the 64-year-old Ghosn, despite Renault employing almost 50,000 people in France.
Nissan may have been motivated to keep the French out of the loop for their memories of a resounding power struggle in 2015 when Macron, as economy minister, increased government involvement in Renault without warning Ghosn or the Japanese. This allowed France to thwart Nissan's efforts to increase its influence on the French automaker.
The conflict could not come at a more dangerous time. The launch of electric vehicles and a move toward autonomous management are presenting long-term challenges and requiring huge investments, making the alliance's scale of manufacturing and R & D sector more important than ever. A separation between joint production, model development, sharing mechanisms and buying parts can cause years of clutter.
Investors, stunned by Ghosn's arrest for alleged financial misconduct and fearing a destructive corporate battle, sold shares of both companies.
"All parties involved should be aware that the last thing Nissan and Renault need is an ongoing management and cultural spit that would lead to a dysfunctional alliance and the fading of competitiveness," wrote Arndt Ellinghorst, an analyst at Evercore ISI. customers.