Renault could agree to cut $6 billion Nissan stake

Renault is in talks that could lead to the automaker reducing its 6.1 billion euros ($5.9 billion) stake in Nissan as the partners bargain over the French company’s plan to split its EV and combustion-engine assets.

Executives have discussed Renault’s carve-out plan and reshaping the pair’s two decade-old alliance since February during meetings in France and Japan. Renault and Nissan on Monday confirmed that they are holding talks over their partnership but they did not provide details.

The automakers said they were holding “trustful discussions” about the future of their alliance, adding that Nissan was considering investing in Renault’s future electric vehicle unit.

“The companies continue to drive structural improvements to ensure sustainable Alliance operations and governance. Any further communication will be done in due course by the Alliance members,” Renault and Nissan said in a joint statement.

The automakers’ lopsided capital ties have long been a contentious issue for Nissan. The Japanese company is pressing Renault to reduce its stake to 15 percent from 43 percent to draw level with Nissan’s share in Renault, sources said, declining to be named as details are private.

The French state, with a 15 percent shareholding in Renault, needs to approve any plan, they said.

Transformational revamp

The potentially transformational revamp, which could take effect as soon as next year, comes as Renault seeks to build a future in a declining European car market, the automaker’s mainstay.

Under Renault’s plans, an entity dedicated to EVs and software would be based in France and employ about 10,000 people by 2023 while a second entity would focus on internal combustion and hybrid powertrains, and be based outside France, also with a staff of about 10,000.

Renault CEO Luca De Meo attended the Formula 1 race in Suzuka, central Japan, on Sunday, giving him an opportunity to speak with Nissan CEO Makoto Uchida. De Meo will present an update of his strategy Nov. 8, when he is due to give details on the planned carve-outs, whose codenames are “Horse” and “Ampere.”

While no decisions have yet been made, there is a chance that the talks will lead to an agreement before this date, sources said.

China concerns

Renault is seeking for Nissan to participate in its EV business while retaining a 51 percent stake, the people said. For the combustion-engine assets, the company is planning a new entity with Aurobay, a joint venture between Volvo Car and China’s Zhejiang Geely Holding Group as well as other investors.

Nissan is resisting this move due to concerns about giving a Chinese company access to the alliance’s joint technology, sources said.

Analysts welcomed Renault the possibily of Renault cashing in some of its Nissan stake.

“We would see any re-balancing of Renault’s 6.1 billion euro stake in Nissan as a step toward better capital allocation at Renault,” Philippe Houchois, a Jefferies analyst with a buy rating on the French carmaker’s stock, said in a note. “We find Renault to be both open-minded about changes in the Alliance and more assertive in dealing with Nissan.”

Bloomberg and Reuters contributed to this report