A hoped-for merger between Fiat Chrysler and Renault is dead. Long live the Renault-Nissan-Mitsubishi Alliance — or else.
That, in essence, was the message that emerged from interviews last week with Jean-Dominique Senard, the chairman of Renault, and Keiko Ihara, an independent Nissan board member, about the future of the troubled partnership between the automakers.
Neither executive put it quite so bluntly. But both acknowledged the overwhelming technological and market forces that are prompting carmakers like Volkswagen and Ford to bury longtime rivalries so they can confront what increasingly appears to be the greatest threat to their survival: Silicon Valley companies like Google and Uber.
Mr. Senard and Ms. Ihara both stressed the importance of rescuing the longtime partnership between Renault and Nissan, despite the turmoil that followed the arrest last year and subsequent ouster of its longtime leader, Carlos Ghosn. Tensions between the two carmakers increased in May after Renault failed to tell Nissan about merger talks with Fiat Chrysler until late in the game. The merger eventually fell through.
Only by combining forces can Nissan and Renault afford the huge investments they need to make in autonomous driving and other technologies to avoid obsolescence, the executives said. Unlike carmakers, the big tech companies, swimming in money, do not have to struggle to sell their core product while devising revolutionary ways of travel.
“If the auto industry doesn’t bear those investments,” Mr. Senard told a small group of journalists at Renault’s offices outside Paris at a meeting organized by the Anglo-American Press Association, “someone else will.”
Asked whether that someone might be Google, which has invested heavily in autonomous-driving technology, Mr. Senard answered: “Maybe. Why not? It could be anyone, even players that do not yet exist.”
The automotive industry is “entering a new era” in which industrial scale and new technologies will separate winners from losers, Ms. Ihara said in a separate interview at Nissan’s headquarters in Yokohama, Japan.
“We need to increase the speed at which we provide service and improve our products,” she said. “That’s going to require increased costs, and the ability to split up those costs is going to make us extremely efficient.”
When Renault and Nissan founded the alliance in 1999, it was ahead of its time in many ways, an example of two big carmakers joining forces to share the costs of developing new vehicles and buying components. Mitsubishi joined in 2016.
Now alliances are all the rage as traditional automakers begin to develop battery-powered vehicles and self-driving technology.
The transformation of the industry, the biggest in a century, is occurring amid a slump in global auto sales that is eroding the amount of money carmakers have to invest in new technologies and production lines. That puts established carmakers at a disadvantage against well-financed tech companies like Uber, which is also working on self-driving cars.
Events this month underscored the challenges. Daimler, the maker of Mercedes-Benz cars, issued a profit warning. BMW replaced its chief executive. And Renault reported a 6.7 percent decline in sales in the first half of the year, to 1.9 million vehicles, compared with the same period a year earlier.
Nissan is also struggling. Its worldwide sales were down 7.5 percent in the first five months of 2019 from a year earlier, to 2.2 million vehicles.
The future of the Renault-Nissan-Mitsubishi Alliance has been uncertain since Mr. Ghosn, the architect of the partnership and its longtime leader, was arrested in Japan in November on charges of financial wrongdoing, which he has denied.
Fiat Chrysler’s attempt to merge with Renault added to the strain. Renault executives did not tell their Nissan counterparts about the talks with Fiat Chrysler until days before the potential deal was announced. The merger plan fell apart abruptly in June after Fiat Chrysler complained of meddling by the French government.
Mr. Senard said he believed that discussing a possible merger with Fiat Chrysler made sense, and did not rule out reviving it. “As we speak, there are no talks,” he said. “It’s dead. But you can always dream about things.”
Relations between the French and Japanese deteriorated further as the companies argued about plans to create committees within Nissan’s board of directors that would oversee appointments of managers and scrutinize company finances. Mr. Senard threatened to use Renault’s controlling stake in the Japanese automaker to kill the changes unless the company included him and Thierry Bolloré, Renault’s chief executive, on the committees.
Nissan eventually acceded to the demands, and the board was reorganized last month to include more independent directors with more diverse backgrounds, including in the legal and entertainment industries. In the interviews last week, Mr. Senard and Ms. Ihara portrayed the changes as a turning point.
Tensions do remain, however. Mr. Senard acknowledged that people close to Hiroto Saikawa, Nissan’s chief executive, were motivated by nationalism in trying to define the relationship.
He said that he believed the group harboring such beliefs was “a very small one” and had a limited life span because Nissan’s new board saw the necessity for change.
“I spend a tremendous amount of time on the relationship with Mr. Saikawa,” Mr. Senard added. “I speak to him sometimes almost every day.”
“The alliance will revive,” he said. “I’m not worried about that at all.”
The view from inside the alliance is not so rosy. More than a dozen joint Renault-Nissan projects have stalled since Mr. Ghosn’s ouster, according to two people familiar with the company’s operations who spoke on the condition of anonymity to discuss internal corporate information.
Ms. Ihara acknowledged that some projects had been shut down, but she said that was a normal part of the alliance’s work. “We’ve taken a look at operations and projects and canceled those that should be canceled,” she said. “New areas of cooperation are increasing.”
Earlier this year, “there were points of concern and voices of uncertainty within the company,” Ms. Ihara said. “Now, on the contrary, I feel that we’re carrying out constructive projects and constructive investments together.”
Mr. Senard said that in the face of a changing industry, “the only risk I see is, will we be strong enough to have enough resources to invest massively in the technology necessary to let us keep the leadership?”
“That’s why I’m incredibly anxious to see the alliance strengthen,” he said. “The real risk is that in a few years’ time we aren’t strong enough to generate sufficient cash flow in what we think should be the direction of mobility.”
The alliance’s problems will probably continue to be publicly aired, particularly if Mr. Ghosn succeeds in his legal effort in the Netherlands to wrest open some of the details of his ouster.
He has sued Nissan-Mitsubishi BV for wrongful dismissal in Amsterdam, where the two carmakers’ joint venture is based, according to a spokesman of the Court of Amsterdam. Mr. Ghosn’s lawyers contend that, under Dutch law, he has the right to see the files and arguments that led to his dismissal.
Nissan International Holding, which is also based in the Netherlands, is named as a defendant in the same suit.
Mr. Ghosn is also seeking back pay, which his legal team estimates at nearly $17 million, for the months he was detained and unable to work before being voted off the companies’ boards. His filing, which will be reviewed by the court on Thursday, is a bid to gain information in open court about his dismissal that may be useful in his upcoming trial in Japan. The revelations may well prolong the turmoil between the carmakers.