Renault,FCA merger> Nissan is “outside the mosquito net”(kaya no soto)

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Renault,FCA merger> Nissan is “outside the mosquito net”(kaya no soto)

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Renault’s FCA merger move leaves partner Nissan in the cold
June 4, 2019  YURI KAGEYAMA


TOKYO (AP) — Some Japanese are using an old expression to describe how
Nissan was left out of talks that led to the proposed merger between its
French alliance partner Renault and Fiat Chrysler Automobiles: “kaya no

That translates to “outside the mosquito net,” or the unlucky person outside
the net, getting bitten while others are safe inside. In other words, the
odd man out.

Nissan Motor Co. wasn’t consulted in advance about the proposed merger
announced last week, which would create the world’s third-biggest automaker,
trailing only Volkswagen AG and Toyota Motor Corp.

In a statement Tuesday, Nissan CEO Hiroto Saikawa raised doubts about his
company’s continued participation in a longtime alliance with Renault if the
merger goes through. A deal merger would “significantly alter” the alliance
structure, he said.

“This would require a fundamental review of the existing relationship
between Nissan and Renault,” Saikawa wrote. “From the standpoint of
protecting Nissan’s interests, Nissan will analyze and consider its existing
contractual relationships and how we should operate business in the future.”

Renault’s board met Tuesday and delayed a decision on whether to launch
merger talks with FCA. The board will convene again Wednesday to study the
proposal. Even if it greenlights merger talks, the process of consultations
with unions, the French government, antitrust regulators and others is
likely take about a year.

In any case, Nissan doesn’t appear to have much say. The Yokohama-based
automaker is 43% owned by Renault and holds 15% of its French partner.

Nissan’s position has weakened since the November arrest of its former
chairman, Carlos Ghosn, for alleged financial misconduct. The star executive
was credited with leading Renault’s rescue of Nissan from near bankruptcy 20
years ago.

In recent years, until 2018, Nissan had been more profitable than Renault,
with a solid reputation for quality and innovation and strong model lineup
that includes the March subcompact, Leaf electric car and Infiniti luxury

Partnering with what could be a behemoth Renault-Fiat Chrysler would bring
merits of scale, the savings that come from sharing platforms, components
and research costs at a time when all the world’s automakers are rushing to
develop energy-efficient and autonomous-driving technology.

Saikawa acknowledged potential benefits in his statement, saying that the
addition of FCA would expand opportunities for collaboration and further

But analysts warn such size would pose major coordination and
decision-making headaches. Nissan might also simply be dwarfed by its
alliance partners.

“There is risk that Nissan will not be able to maintain its independence,
its own brand power,” said Tatsuo Yoshida, senior analyst at Sawakami Asset
Management in Tokyo. “It’s like the saying: Too many cooks spoil the broth.”

Reflecting widespread opinion, Yoshida said Nissan can’t afford to break
with Renault: After two decades together, the automakers — and smaller
alliance partner Mitsubishi Motors Corp. — share too many operations and
products. Breaking free would take at least several years, spanning the
product cycle of a vehicle, the time it takes from the design stage to the
next model change.

“They’re already at the point of no return, like a couple that simply cannot
get a divorce this late in the game,” he added.

In the intensely competitive auto world, going it alone would be perilous
for Nissan, or any automaker, though there are a few exceptions, such as
Japanese rival Honda Motor Co.

Despite longtime speculation about a full merger with Renault, Nissan has
resisted. Should Renault merge with FCA, which combined the American and
Italian automakers, the partnership will become even more unbalanced.

In theory, Nissan models and Chrysler models don’t overlap in the U.S.
market, so there might be ways they could complement each other. But it’s
unclear whether the companies will want such a partnership.

In the meantime, Nissan is grappling with problems of its own.

Ghosn’s arrest has tarnished Nissan’s reputation and left it with something
of a leadership vacuum, given his vast influence over the company before
prosecutors arrested him on charges of under-reporting compensation and
breach of trust.

Ghosn insists he is innocent but his trial has yet to start and is likely to
take months. Saikawa has vowed to beef up the company’s corporate

Nissan’s profit for the fiscal year that ended in March tumbled to 319.1
billion yen ($2.9 billion), down from 746.9 billion yen the year before, its
worst showing since the global financial crisis a decade ago. In this fiscal
year it’s expected to drop to 170 billion yen, due to restructuring, rising
material costs and other expenses. Analysts say Nissan’s North American
operations, potentially a lucrative region for global automakers, especially
need a fix.

In the unpredictable world of auto alliances, anything’s possible.

It’s conceivable that Saikawa is secretly courting another automaker and
could make a surprise announcement, according to Satoru Takada, analyst at
Tokyo-based consultancy TIW.

But the consensus opinion, for now, is that Nissan’s options are limited.

It can politely put forward its views as the talks progress and hope to
jockey for a better position in the group, Takada added.

There’s a risk, though, that Nissan’s partners might take advantage of its
weaker position to extract one-sided gains from its manufacturing and
technological prowess, he said.

“Renault sure did a number on Nissan,” said Takada. “Nissan has to work hard
to retain its say and its freedom.”

Auto Writer Tom Krisher in Detroit contributed to this report.
kaya no soto
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