Carlos Ghosn built the world’s biggest carmaking alliance. Now it has to figure out what to do without him.
The auto industry legend, who is stuck in a Tokyo jail cell,has been replaced as chairman and CEO of France’s Renault (RNLSY), ending his grip on a coalition of companies that produces one out of every nine cars sold worldwide.
Detained for more than two months by Japanese prosecutors on suspicion of financial misconduct, Ghosn was fired weeks ago by Nissan (NSANF) and Mitsubishi Motors, the alliance’s other members. He denies the charges.
The group, which employs over 450,000 people and produces more than 10 million vehicles a year, faces a shakeup.
“Ghosn was very much the glue that held the alliance together,” said David Bailey, a professor of industrial strategy at Britain’s Aston University. “Going forward, the alliance needs to rely on more than just one person.”
New beginnings
For now, the key players insist that the alliance is strong.
Renault on Thursday unveiled its new leadership team, appointing chief operating officer Thierry Bolloré as CEO, and outgoing Michelin head Jean-Dominique Senard as chairman.
In a statement, Renault said Senard would be the main point of contact for its Japanese partners “for any discussion on the alliance’s organization and evolution.”
“He will propose to the board of directors any new alliance agreement that he considers useful for Renault’s future,” the French company added.
Hiroto Saikawa, who took over from Ghosn as Nissan CEO last year, said on Thursday that the naming of new leadership at Renault was “a significant step forward” for the partnership and should resolve recent difficulties in communication.
It was too soon to “discuss a reformation of the alliance,” he said at a news conference in Tokyo. “We should be working now to improve things day to day for the company and maintain the status quo.”
‘Dissolving it would be difficult’
The three companies have more in common than just Ghosn, who crafted the alliance after leading successful turnarounds at Renault and Nissan. They share ownership stakes, technology and manufacturing facilities.
That would make a breakup of the alliance’s complex arrangements extremely painful.
“Dissolving it would be difficult, messy, and time-consuming,” said Travis Lundy, an analyst at investment research network Smartkarma.
“Any split would see Renault run a risk of significant obsolescence,” he added, arguing Nissan and Mitsubishi have more advanced research and are further ahead in electric vehicles.
The existing setup has also provided financial benefits. Sharing resources between the three companies saves them more than €5 billion ($5.7 billion) a year in costs, according to alliance documents.
Greater scale is important as the auto industry undergoes profound changes, such as the shift to electric vehicles and the rise of self-driving technology. Other top names are exploring how to work together, notably Ford (F) and Volkswagen (VLKAF).
Resetting the relationship
The structure of the relationship between Nissan and Renault, the alliance’s two key players, is a key issue.
Nissan, which sells more vehicles than Renault, has only a 15% non-voting stake in the French company. Renault holds more than 40% of Nissan.
Analysts have repeatedly speculated that Nissan executives were uncomfortable about the possibility of Renault and Ghosn seeking full control of the Japanese company.
They also say Nissan may have been uneasy about the fact that the French government is the biggest single shareholder in Renault, which could make the French economy a higher priority than the alliance.
The French government has denied reports that it wants to change the shareholding relationship between Renault and Nissan.
The country’s economy minister, Bruno Le Maire, said that strengthening the alliance was the “most important” thing.
“It is both in the interest of France and Japan to reinforce the alliance,” he told CNN Business’ Richard Quest in Davos.
It’s unlikely any of the companies will walk away from the alliance for the time being. But Nissan could demand a larger stake in Renault or some other restructuring that gives it a bigger say in decision making.
“It is definitely not the end of the alliance,” Lundy said. “Neither company wants that or can afford it.”
Instead, Ghosn’s departure is “a step to resetting it,” he added.
Angus Watson contributed to this article.
