autoevolution

Renault-Nissan Merger Could Happen To Streamline Operations, Strengthen Profit

The year was 1999 when Nissan found itself between a rock and a hard place. Dwindling sales and debt were to blame, but Renault came to the rescue by acquiring 36.8 percent of the Japanese automaker’s outstanding stock. When Nissan got out of its bad phase, the company bought a stake in Renault as well. And what started as a win-win situation went on to become one of the world’s most successful automakers.
Renault-Nissan 1 photo
After Mitsubishi Motors was saved from bankruptcy by Nissan, the three-strong alliance managed to sell one in nine cars in 2017 on a worldwide scale, moving 10,608,366 units. But there’s a change brewing inside the alliance, with Renault and Nissan expected to merge as one and trade as a single entity on the stock exchange.

According to Bloomberg, the two companies “are in talks to merge, seeking to solidify their two-decade-old alliance.” Citing “people with knowledge of the matter,” the report puts chairman Carlos Ghosn as the mastermind of the merger.

What do Renault and Nissan have to gain from merging? Size matters when you’re in the business of making automobiles, and the Volkswagen Group serves as the perfect case in point. Turning the fragmented ownership into one cohesive structure would allow the two automakers to pool their resources more efficiently than ever.

But there’s a little problem with that, and that is the French government’s 15-percent stake in Renault. For the deal to go through, the President of France has to give the thumbs up, but that’s just the tip of the iceberg. Japan’s government has to give its approval as well, and then there’s the matter of incorporating the company.

“One possibility would be to base the company in London or the Netherlands, where cross-Atlantic carmaker Fiat Chrysler Automobiles NV has its corporate charter.” Compared France and Japan, the Netherlands is a tax haven.

To put it as simply as possible, incoming royalties are next to untaxed, with corporations paying low royalty costs to tax shelter companies. Artificially lowering the profit is what’s what. The Rolling Stones has an office there, and a lot of special vehicle purposes of Lehman Brothers Holdings Inc. can be traced back to the Netherlands.

Where does this leave Mitsubishi, you ask? In the first instance, the third member of the alliance will join a shared parts-purchasing organization. From there on in, rumor has it Mitsubishi will be merged as well at a later date.

 

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