Nissan Motor Co is proposing to buy about 20% of Chrysler and bring the troubled US automaker into the Franco-Japanese alliance with Renault SA, the Detroit News reported on Wednesday, citing sources familiar with the situation.
The offer is now before private equity firm Cerberus Capital Management, which holds 80% of Chrysler, the paper said. Citing another source close to the talks, the paper also said Cerberus founder and chief executive Stephen Feinberg still favors a deal with General Motors Corp. Nissan declined to confirm or deny the report.
“This is more of the same noise and we have no comment to make on any of the recent speculations,” Simon Sproule, head spokesman at Nissan, said. Citing unnamed sources, Detroit News said Carlos Ghosn, chief executive of both Renault and Nissan, had sent a proposal in recent days that included revisions to a draft agreement prepared by Cerberus.
Since 2006, when Nissan and Renault studied a possible three-way link-up with GM, Ghosn has held to his position that a trans-continental alliance that includes North America would benefit the existing one. Since forming their equity tie-up in 1999, Nissan and Renault have enjoyed billions of dollars in cost savings every year.
Led by Executive Vice President Carlos Tavares, Nissan has held ongoing talks with Chrysler over the past year that have so far led to three separate projects for the mutual supply of vehicles under original equipment manufacturing (OEM) deals. While Renault would be part of any partnership with Chrysler, Nissan would acquire the stake because it has cash on hand, Detroit News said. Renault’s debts have mounted, especially after buying a 25% stake in Russian automaker Avtovaz for more than $1 billion.
Investors, who balked at the three-way talks with GM two years ago, are likely to react similarly this time. “It’s hard to see the benefit when the global auto market is slowing down,” Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management said. “I’m not sure Nissan can afford to make such a move. It’s likely to be negative on its shares.” Shares in Renault were down 4.8% in Paris, underperforming the 2.7% fall in the CAC-40 index. Nissan’s shares ended down 9% in Tokyo before the report, mirroring sharp falls in other auto stocks as the yen surged. (Reuters)