(Bloomberg) -- Renault SA is open to Nissan Motor Co. pursuing merger talks with Honda Motor Co. as the French automaker seeks way to insulate itself from the crisis plaguing its long-time alliance partner, according to people familiar with the situation.
Renault is eager for the Japanese company to find ways to become stronger given it isn’t itself willing to inject cash into Nissan, said the people, who asked not to be identified discussing internal matters. With a 36% stake, Renault remains Nissan’s biggest shareholder and its approval will be key to any agreement, the people said.
While Renault is open in principle to a deal that can make Nissan stronger, it will closely evaluate any offer that’s made to the Japanese company with an eye to protecting its own interests, the people said. Nissan talks with Honda are still in the early stages, they said.
A spokesperson for Renault declined to comment.
Automakers are contending with mounting challenges including waning demand for electric vehicles in Europe and growing competition in China from local manufacturers led by BYD Co. The shift away from the combustion engine, which is happening at varying speeds in different markets, is disrupting manufacturing and business models that have been in place for decades.
Renault’s Nissan shareholding is a holdover from its longstanding alliance with Nissan and Mitsubishi Motors Corp. The two companies partially unwound their 25-year strategic partnership amid mounting rivalries and mutual suspicion. The looser ties opened up the possibility of alternative partnerships even as Renault and Nissan continue to work together on joint vehicle projects in India and Latin America.
Once considered the alliance’s weak link, Renault leapfrogged Nissan in market value in April as investors rewarded it for accelerating the development of new models, returning to profit and inking new partnerships with technology companies such as Qualcomm Inc. Renault is the only major European automaker not to have issued a profit warning in recent months.
Nissan’s stock jumped 24%, while Honda’s shares declined 3%. Renault rose as much as 7.4%. Even with Wednesday’s gain, Nissan is still down a quarter this year, while Renault has gained 28%.
Alliance and Renault Chairman Jean-Dominique Senard said earlier this year that if there were new partnerships that could make the grouping of automakers stronger, Renault would welcome that. Even in the event of a stake sale, the French manufacturer would benefit from rising Nissan shares.
Honda is considering several options with Nissan including a merger, capital tie-up or the establishment of a holding company, Executive Vice President Shinji Aoyama said on Wednesday following reports overnight of talks between the carmakers.
Nissan’s troubles exploded into the headlines in early November, when the company slashed its profit forecast and said it would have to cull 9,000 jobs globally. It also announced a 20% cut to global output as consumers turn their backs on its lackluster lineup, leaving Nissan models gathering dust at dealerships.
--With assistance from Craig Trudell.
(Updates with details on alliance in seventh paragraph)
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