Renault clinches deal to control Nissan

RENAULT announced yesterday that it will buy 36.8 per cent of Nissan Motors in a $5.4bn (pounds 3.3bn) deal designed to bolster Europe's fifth largest car maker in the tough, consolidating global car market.

Renault will immediately dispatch a delegation of executives to stop Japan's second-largest car maker from sinking under a mountain of debt.

"The companies will retain their specific personalities and identities, and Nissan's problems will be overcome by Nissan staff," said Renault's chief executive, Louis Schweitzer.

Renault is betting that its cost-cutting expertise and capital infusion can get Nissan back on track after losing money in five of the past six years. But analysts' reaction to the deal is mixed.

"The risks for Renault are significant," said Christopher Richter, an auto analyst at HSBC Securities (Japan).

Renault's investment, a record by a foreign company in a Japanese manufacturer, make it Nissan's largest shareholder. Under the terms of the deal, the French car maker takes three seats on Nissan's 40-member board and has the right to increase its stake to 44 per cent.

Two other Japanese car companies - Mitsubishi Motors and Fuji Heavy Industries, makers of the Subaru - are looking for foreign equity partners. General Motors already owns 49 per cent of Isuzu Motors and Ford has a controlling interest in Mazda.

For Renault, the challenge is to cut costs quickly and take advantage of Nissan's global production and sales network to increase market share. To start that process, Carlos Ghosn, Renault's executive vice-president, who has earned the nickname "Le Cost-Killer", will become Nissan's chief operating officer, Renault said.

"A lot has to be done," said Jeremy Tonkin, a car analyst at Towa Securities in Tokyo. "Debt has to be slashed, operating costs have to fall, procurement has to be looked at, and Nissan has to cut the number of its platforms."

The company has 25 vehicle platforms - or vehicles that share engines, transmissions, and suspension - compared with Renault's seven.

If successful, Renault could turn Nissan into a smaller but tougher competitor to Honda, Japan's third-largest car maker.

The changes won't come easily for the 66-year-old Nissan, one of Japan's biggest industrial conglomerates. Job cuts for workers hired for life could be especially difficult.

"Renault will be up against a big struggle to match the French and Japanese styles of management," said Mr Tonkin. "Renault may want more radical restructuring than Nissan is willing to do and faster than Nissan is willing to do it."