France’s Renault Role Limits Auto Maker’s Boss - USA DAILY NEWS

France’s Renault Role Limits Auto Maker’s Boss

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PARIS—In declining to back

Fiat Chrysler Automobiles


FCAU 0.74%

NV’s plan to merge with

Renault
SA,


RNO -0.90%

the French government risks weakening its chief negotiator in any future talks, Renault Chairman Jean-Dominique Senard.

Renault shareholders are expected to vote in favor of Mr. Senard on Wednesday, when they hold their first annual meeting since the executive was appointed in January to succeed Carlos Ghosn. Renault’s biggest shareholder, the French government, has said Mr. Senard has its full confidence.

The vote of support, however, masks underlying tensions between Mr. Senard and the government, according to people close to Renault. Mr. Senard considered resigning in the hours after Fiat Chrysler withdrew its offer last week, said a person familiar with Mr. Senard’s thinking. He decided to stay after receiving messages of support from Renault’s board and the French government, the person said.

Fiat Chrysler and Renault haven’t ruled out the possibility that merger talks could resume, and the French state considers Mr. Senard as crucial to any future negotiations. Mr. Senard has spoken with Fiat Chrysler Chairman John Elkann a number of times since the deal fell apart, according to people familiar with the matter.

Mr. Senard ran into trouble shortly after his appointment as chairman in late January. The French government tapped him to stabilize Renault’s decadeslong alliance with

Nissan Motor
Co.

That partnership had grown increasingly turbulent after Mr. Ghosn’s arrest on allegations of financial misconduct. Mr. Ghosn has denied the charges.

To the French government, Mr. Senard appeared well-suited for the role. The son of a diplomat, he had a long career in French industry, most recently as CEO of tire maker

Michelin.



“We have to strengthen the climate of confidence and cooperation that in the past has been the strength of the alliance,” Mr. Senard told reporters at the time.

Behind the scenes, Mr. Senard got to work on plans to merge Renault. His first plan called for Renault to merge with Nissan by creating a holding company that was split evenly between the car makers’ shareholders. Nissan refused to consider the idea.

That left Mr. Senard to focus on talks with Fiat Chrysler. He negotiated the terms of a merger with Fiat Chrysler over a whirlwind two-week period before presenting it to French Finance Minister Bruno Le Maire.

The French government, which has a 15% stake in Renault, said it would only support the merger if it was also backed by Nissan, which has been in an alliance with the French auto maker for two decades. French officials say they lacked sufficient guarantees from Nissan that the combined company could operate within the globe-spanning alliance, which allows Renault and Nissan to create economies of scale by sharing things as diverse as purchasing operations and vehicle platforms.

The French government’s stance effectively undercut Mr. Senard by giving Nissan the final say on whether the French auto maker merges with Fiat Chrysler, people close to Renault said. On Monday, Mr. Le Maire told reporters in Tokyo that France’s stake in Renault is a product of history, and that the current government wouldn’t have chosen to buy into the car maker.

People close to Nissan now say the Japanese auto maker will consider backing the merger if there is an agreement in place for the combined company to reduce Renault’s 43.4% stake in Nissan. One of Fiat Chrysler’s advisers met with Nissan Chief Executive Hiroto Saikawa on Monday, according to people familiar with the matter.

French officials have said they are open to the idea, but it carries risks. For years, Renault has counted on the large dividend it receives from Nissan to lift its profit. Last year, the dividend accounted for 46% of Renault’s profit.

The French state’s ties to Renault run deep. During the Nazi Germany occupation of France, Louis Renault—who founded the company with his two brothers in 1898—agreed to produce vehicles for German forces. The move aimed to safeguard France’s manufacturing base from German authorities who were considering shifting Renault’s production to Germany.

Toward the end of the war, Mr. Renault was jailed for alleged collaboration with the Nazis, and died while awaiting trial. In January 1945, a provisional French government headed by Gen. Charles de Gaulle nationalized Renault.

Write to Nick Kostov at Nick.Kostov@wsj.com and Stacy Meichtry at stacy.meichtry@wsj.com

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