Renault & Nissan's CEOs start negotiating to reshape their alliance

Renault and Nissan have come together to resolve a standoff over intellectual property. These negotiations will include looking at the potential Renault decreasing its stake in Nissan.

Renault and Nissan are in negotiations to resolve a standoff over intellectual property, which may clear the way for a historic reworking of their alliance in the coming weeks.

Renault CEO Luca de Meo has flown into Tokyo for a weekend of talks with Nissan CEO Makoto Uchida, kicking off a month of talks that will include looking at the potential of Renault decreasing its stake in Nissan from 43% to 15%, according to sources familiar with the matter.

Despite long-standing conflicts, the partnership, which was formed in 1999 to enhance collaboration between the two corporations, has remained intact. However, as the automotive industry swings inexorably toward electric vehicles, pressure is mounting on Renault and Nissan to maximize the alliance's benefits.

The focus of this weekend's meetings would be two Renault proposals aimed at safeguarding the company's future, but they would require Nissan's approval, according to sources.

The first goal was to persuade Nissan to agree to Renault's intention to sell a portion of its combustion engine business to China's Geely as part of a strategy unveiled in February to carve apart its heritage business.

Renault prefers to build a new joint venture with Geely's Aurobay company, a dedicated engine unit co-owned by the Chinese automaker and Volvo Cars.

It is a measure that has sparked considerable opposition from Nissan, which does not want technology that it has built with Renault over many years to be shared with a Chinese company, according to the sources. De Meo planned to close the agreement with Geely before the French automaker's capital markets day in early November.

During the negotiations, De Meo will also press Nissan to invest in a new "electric vehicle and software" unit, which the French automaker announced it planned to IPO in April.

While settling the intellectual property dispute is a pressing goal of the discussions, Nissan aims to use them as an opportunity to demand a major reduction in Renault's ownership in the firm, which has long been a source of contention.

According to people familiar with the partnership, although Renault has historically been averse to such a shift, its opposition has diminished as it tries to deepen co-operation with Nissan on operational issues. According to the persons, Renault executives claimed that the alliance with Nissan would live or die on its capacity to move through with joint production plans, opening the door to prospective changes in the ownership structure.

"There have been debates about everything. The crucial thing today is to stick with what supports the alliance; the capital structure is secondary," one of the persons stated. While the two corporations struggle with the collaboration, their main competitors are strengthening their ties. Stellantis, founded by the merging of Peugeot owner PSA and Fiat-Chrysler of Italy, is now one of the world's most valuable carmakers, while Honda and General Motors are collaborating closely on battery technology.

All three companies, Renault, Nissan, and Geely, declined to comment. The French government owns 15% of Renault and will have a say in any modifications to the carmaker's stake in Nissan. The French Economy Ministry did not respond.