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Ghosn's demise exposes France in showdown with partner Nissan
Auto industry

Ghosn's demise exposes France in showdown with partner Nissan

by Bloomberg 4 min. 22.12.2018 From our online archive
French-Japanese alliance threatened by downfall of man central to the functioning of partnership
Ghosn has already spent a month in jail in Tokyo Photo: AFP
Ghosn has already spent a month in jail in Tokyo Photo: AFP

An hour's drive north of Paris along the River Seine lies Flins, home to Renault's biggest and oldest factory, where 2,700 workers and 900 robots toil in tandem to churn out a steady stream of compact cars. More than half of the vehicles rolling off the line, however, don't carry the Renault diamond badge.

Instead, the factory's most important car is the Nissan Micra, of which Flins produced 94,000 last year. The site's shift towards the Japanese model is emblematic of Nissan'ss heft in an alliance it's nevertheless failed to dominate since its inception almost two decades ago.

Even French president Emmanuel Macron has been drawn into photo ops with management to tout Nissan's plans in France, rolling up last month at Renault in the northern city of Maubeuge, where a Nissan van will be made. While Flins is ramping up the Zoe electric car, the vehicle still accounts for less than a fifth of output.

But the French-Japanese alliance is now threatened by the downfall of the man central to the functioning of the partnership: Carlos Ghosn. On Friday, the executive was re-arrested on more expansive charges of corporate wrongdoing. The Nissan side has sought to harness the leadership void to address what it perceives as French favouritism by Ghosn. The French government, on the other hand, has moved to protect the pact as Renault's biggest shareholder, saying it has helped secure business over the years, a view shared by the workers of Flins.

Macron's tough month

"The factory needs the alliance," said Dominique Bertrand, who represents the Force Ouvriere labor union at Flins, where he started on the assembly line more than four decades ago. "Electric cars are the future, but they won't keep the whole plant busy."

The stakes are high in France, where unemployment is above 9% and Renault is one of the biggest employers, with almost 48,000 people on the payroll. Macron has endured a combative month. Demonstrators clad in yellow vests swarmed the streets of Paris to protest his policies, in a clash that has morphed into an explosive movement against inequality.

While Ghosn's decline and fall has gripped the corporate and political world in Japan and France, the response has been fractured. In the wake of a lengthy investigation by Nissan, executives in Asia removed Ghosn from his posts, while the European side kept him in place, arguing he should be presumed innocent until proven otherwise.

No voting power

The shareholding agreement gives Renault a 43% stake in Nissan, while Nissan holds 15% of Renault, with no voting rights. The agreement also stipulates that Renault's CEO heads the alliance.

When the alliance began in 1999, Renault was about the same size but in much better shape financially than Nissan, which was on the verge of collapse. Fast forward two decades, and Nissan overshadows its French partner with almost twice the revenue and a larger profit contribution.

Ghosn is unlikely to re-emerge in public anytime soon. He's already spent a month in jail in Tokyo, and the latest set of charges accuse Ghosn of inflicting financial damage to Nissan from his own unprofitable investments. Ghosn's lawyers declined to comment, and the French government has not responded to the latest developments.

Globalist Ghosn

While Renault has undoubtedly benefited from the alliance, workers in Flins don't necessarily share the view that Nissan has propped up its partner, or that Ghosn – a globalist with roots in Brazil, France and Lebanon – is partial to Paris.

On the contrary, the view in Flins is that Nissan has boasted cars with fresher designs and hot-selling crossover vehicles like the Juke and the Qashqai, something that Renault required years to replicate. Nissan also has pushed into the important Chinese market on Ghosn's watch, while Renault has little presence there.

Nissan does rely on Renault, too, for better access to the vast European market. Renault makes engines for Nissan in Cleons in northern France, and the Nissan-badged vans sold in the region are Renault under the hood.

Nissan and its diminutive Micra, a bulbous car that's been around since 1982, are key to keeping Flins humming along. Less than a decade ago, it looked as if building the Micra in Western Europe was too costly: Nissan moved production from Sunderland in the UK to a Renault factory in Chennai, India.

But quality issues and the distance from key European market led Nissan to relocate the Micra once more, this time to Flins. There were also more synergies with Renault's Clio – France's bestselling car this year that's also built in Flins and has the same engine transmission as the Micra.

It's a complex work web that highlights the intertwined relationship between Renault and Japanese partner Nissan.

"Building the Micra in Flins was really a symbol of the alliance," said Yassine Aldidi, a representation of the CFDT union at the plant. "Now we're wondering if this is the beginning of the end."