Renault CEO Loses Clash With French State on Shareholder Votes

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French Economy Minister Emmanuel Macron
French Economy Minister Emmanuel Macron said on Tuesday, “I want to see this through to the end.” Photographer: Frederick Florin/AFP via Getty Images

Renault SA Chief Executive Officer Carlos Ghosn lost a clash with French Economy Minister Emmanuel Macron, as the Socialist government won a shareholder vote to keep the carmaker under French control.

A proposal to allow Renault to sidestep a French law that provides double-voting rights for long-term shareholders failed to win the two-thirds support it needed to pass. Investors holding 39 percent of Renault shares, including the government, voted against. Thursday’s annual meeting followed three weeks of tense exchanges after the state grabbed more influence by unexpectedly boosting its stake in Renault.

For Ghosn, who has three passports and speaks four languages, the 2014 law that gives extra voting rights to those owning stocks more than two years represents a flagrant disregard of the principle of one share, one vote. For the French government, it’s a way to ensure continuity in a company already partially owned by a powerful foreign partner.

“I want to see this through to the end,” Macron told reporters in Strasbourg on Tuesday. “It’s normal that a state defends its rights. Who is upset by double voting rights? The people -- the speculators, the market investors -- who are short-termists. It’s a real ideological debate.”

Renault’s Japanese partner Nissan Motor Co. holds 15 percent of the French manufacturer, with no voting rights.

“We are not interventionist,” Macron said. “But the state will not be a powerless shareholder.”

Relationship Cooled

Ghosn is CEO of both companies and has steered the 16-year-old Renault-Nissan alliance for a decade. He’s due to collect 7.22 million euros ($8.1 million) in cash and shares in remuneration from Renault for last year, nearly three times what he made in 2013. The figure concerned some in the French government, according to people familiar with the situation, who asked not to be named discussing private details.

The state’s move on the shares shows how its relationship with Ghosn has cooled. Macron shocked the CEO by giving him only a few hours’ notice of the stake increase before making it public on April 8, people familiar with the matter said.

Renault spokesman Bruno Moreau declined to comment on discussions between the company and the government.

Ghosn called two successive emergency board meetings at Renault and Nissan amid concerns that the French stake increase may damage the alliance.

Ghosn asked shareholders to vote against the double-rights rule today under an opt-out allowed in the law. The French state’s win today boosts its voting rights to 28 percent from 17.7 percent at the beginning of April. The government had said it would restore some equilibrium by selling its additional shares after today’s ballot.

The law also automatically doubles the voting rights of Mercedes-Benz maker Daimler AG, which holds 3.1 percent of both Renault and Nissan under another cross-shareholding deal.

Power Shift

Ghosn still has options to shift the balance of power. Renault and Nissan could decide to change the terms of their agreement, lowering Renault’s stake in the Japanese manufacturer and in turn activating Nissan’s votes in Renault, according to people familiar with the matter.

Another option would be to sell new shares to dilute France’s stake. The company could then try again next year to pass a motion nullifying double voting rights, the people said.

When Renault first bought shares in Nissan, the Japanese carmaker was in disarray and was losing money. Sixteen years later, its revenue is twice Renault’s, and it contributed more than 80 percent of Renault’s 1.89 billion euros in consolidated net income last year.

Nissan’s Clout

The link with Nissan helped Renault survive Europe’s economic crisis in better shape than many peers. The partners sold about 8.5 million vehicles in 2014, making it the world’s fourth-largest carmaking group.

Still, Renault’s unions are concerned about keeping engineering and industrial jobs in France as Nissan’s clout increases. They have backed Macron in his quest to maintain influence at the carmaker, which was state-controlled for more than half a century after World War II.

“The employees feel that the alliance now favors Nissan,” said Laurent Smolnik, an FO union leader at Renault. “Renault shouldn’t be weakened.”

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