Breakingviews - Renault exit could grease Nissan's turnaround
HONG KONG, June 20 (Reuters Breakingviews) - A Renault (RENA.PA), opens new tab exit could speed Nissan Motor's (7201.T), opens new tab turnaround. Selling the remaining $2 billion stake in its longtime French partner would help buy time to put its house in order. Accepting the end of an era makes sense for both.
Japan's Nissan has money for a rainy day. The cars business boasted, opens new tab $10.3 billion net cash as of March 2025, as well as unused lines of credit worth $14.5 billion. But a lengthy recovery could erode those funds. The unit's free cash flow turned negative to the tune of $1.7 billion last year, when it reported an operating loss of 268 billion yen ($1.8 billion). Things will get worse before they get better: it won't earn operating income until 2029, per analyst estimates compiled by Visible Alpha. That could make refinancing some $4 billion of bonds due in 2026 more challenging.
Meanwhile, the Renault relationship has drifted. In 2023, their Alliance was rejigged, opens new tab to allow for new partners. Now, new CEO Ivan Espinosa's plan involves selling Nissan's stake in their joint Indian plant and consolidating production in Latin America, where the revamped Alliance was supposed to stay strong.
Anchoring what remains through a cross-shareholding is unnecessary. True, there are ongoing projects. Renault factories currently produce three models for Nissan. Three more will follow in India, and Nissan's Micra in Europe will use its partner's EV platform. The latter is important as the European Union's carbon emissions rules demand carmakers buy credits if they cannot sell enough battery-powered vehicles. But this cooperation could continue or even expand without the pair's mutual holdings.
Moving on would unlock cash. Nissan's full 15% stake in the French carmaker is now worth some $2 billion. The pair's most recent agreement in March allows them to reduce their respective stakes to 10%: Espinosa intends to exercise that option, the Nikkei reported on Monday.
He could ask Renault to let him sell the lot. Nissan's share price, at 351.9 yen as of Thursday's close, is well below the 400 yen Renault paid in 1999, so the group – fresh from its own successful turnaround – has a vested interest in doing whatever it can to reboot the beleaguered brand. For the same reason, Renault seems unlikely to reciprocate by dumping Nissan's stock immediately.
The downside is that then Renault would still hold its stake with 15% voting rights, giving it more influence over the Japanese group. But Espinosa is in no position to be picky if an exit helps to kickstart new beginnings.
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Nor is the management team stable; the company is on its second CEO since Adrian Cheng stepped down in September. By the end of 2024, total liabilities stood at $17.4 billion – a fraction of Evergrande's $332 billion as of June 2023. That means even if New World's debt woes worsen, local banks, mostly well-capitalised, can withstand the shock. The city's biggest bank, HSBC, for example, had more than $33 billion in Hong Kong commercial property loans on its books at the end of 2024. Some $3.2 billion of that was already classified as credit impaired as of June last year. CEO Georges Elhedery told, opens new tab shareholders in February that future credit losses on it were unlikely to be big thanks to a high level of collateral, with loan-to-value ratios well above 50%. Yet a big-name default could trigger cascading effects, opens new tab where homebuyers lose confidence, leading to another 7% drop in prices this year, according to S&P Global Ratings. 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Hong Kong can weather a default by New World but, before it comes to that, the Cheng family, which owns 45% of the company, could step up as a lender of last resort. That will be a fitting outcome to this tale of two property crises.
