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Renault to propose joint holding company with Nissan, Nikkei reports

Key Points
  • Renault to issue modified integration proposal to Nissan which would weaken French government stake -Nikkei
  • Renault sales fell to 12.5 billion euros for January-March from 13.2  billion a year earlier, the company said Friday.
  • The company's Iran pullout resulted in a 31 percent decline for its Africa, Middle East and India sales region.
A Renault car showroom
TonyBaggett | iStock Editorial | Getty Images

Renault will propose to Nissan Motor Co a plan to create a joint holding company which would give both firms equal footing as the French automaker seeks further integration with its Japanese partner, the Nikkei newspaper reported on Friday.

Under the proposal, both firms would nominate a nearly equal number of directors to the new company in which ordinary shares in both Nissan and Renault would be transferred on a balanced basis, the newspaper said without citing sources.

This would effectively dilute the stake held by the French government in Renault to around 7 to 8 percent, from its current 15 percent, it added. The new company would be headquartered in a third country, such as Singapore.

Renault plans to make the proposal to Nissan soon, the Nikkei said, having modified an earlier merger idea which Nissan rejected on April 12.

Nissan declined to comment on the issue.

The report of the proposal comes as the outlook for the alliance - one of the world's top automaking partnerships - has clouded since the arrest in November of its main architect, Carlos Ghosn, for financial misconduct.

It also comes as Nissan's financial performance struggles following years of focusing on volume sales over building its brand, particularly in the United States, its biggest market.

Earlier this week, the Japanese automaker slashed its profit forecast for the year just ended to its lowest in nearly a decade, citing weakness in its U.S. operations. 

Renault for years has been vying for a closer merger with Nissan, which it rescued from the brink of bankruptcy two decades ago. Ghosn had been working to achieve a deeper integration before his arrest on financial misconduct charges in November last year.

While the automakers have been consolidating many of their operations over the past decade, including procurement and production, many executives at Nissan have opposed an all-out merger with Renault.

Instead, Nissan has argued for a more equal footing with Renault, which holds a 43 percent stake in its bigger partner. Nissan holds a 15 percent stake in Renault.

It was unclear whether Renault would hold the casting vote in majordecisions at the new company, as it did in Renault-Nissan B.V., a strategic management company jointly held by both companies which oversaw operations for the partnership.

That company was disbanded last month after an internal investigation by Nissan following Ghosn's arrest indicated that the company may have been involved with financial misconduct by the former chairman.

Nissan's partnership with Mitsubishi Motors Corp <7211.T>, in which it hold a 34 percent stake, would remain unchanged under the new proposal, the Nikkei said.

Renault said first-quarter revenue fell 4.8 percent, weighed down by currency setbacks and the French carmaker's withdrawal from Iran last year.

Revenue fell to 12.527 billion euros ($13.95 billion) for January-March from 13.155 billion a year earlier, the company said on Friday. On a like-for-like basis excluding currency effects, the decline would have been 2.7 percent.

Renault's global deliveries fell 5.6 percent to 908,348 vehicles in the quarter. The company's Iran pullout resulted in a 31 percent decline for its Africa, Middle East and India sales region, while its European sales volume rose 2 percent.

The carmaker reiterated 2019 guidance including higher revenue, positive automotive cash flow and a group operating margin close to 6 percent.