Nissan loan guarantee adds to questions about Renault alliance
When Nissan was request On the chances of dipping into Japanese government money at the end of May, the loss-making automaker admitted it was exploring “all possible options” to survive the coronavirus crisis in demand for vehicles.
The response sparked speculation that Japan’s second-largest automaker is seeking emergency loans for companies affected by the pandemic from the state-backed Development Bank of Japan. It turns out that Nissan did just that, but the government’s helping hand went much further to save a company that was struggling long before Covid-19.
The government has guaranteed 130 billion yen (1.2 billion yen) of 180 billion yen in loans granted by DBJ to Nissan, representing the largest state guarantee ever given to a Japanese company, according to people familiar with the deal .
If the automaker does not repay the loans, Tokyo will assume up to 80% of the guaranteed amount.
It is still unclear why the DBJ decided to support Nissan so generously.
If the Asahi Shimbun had not reported it on Monday, the guarantees may never have been revealed. And even now that they have been revealed, there has been little public explanation so far, with DBJ declining to comment and Finance Minister Taro Aso stressing that the government was not involved in the specific decision. to Nissan. Nissan says it had no knowledge of state guarantees.
What prompted the decision matters, however, not least because Japanese taxpayers’ money is at stake. But the decision could also have significant consequences for the group. strained alliance with French Renault.
A big question that the warranty raises is whether this means that the Japanese government will be more actively involved in the future of Nissan and its capital relationship with Renault.
Since its creation two decades ago, the alliance has always had a stronger French influence. Renault, which is partly owned by the French state, owns 43 percent of Nissan’s voting shares, while the Japanese group only owns 15 percent of its counterpart’s non-voting shares.
After assisting Renault to exit Nissan from the brink of bankruptcy in 1999, the Japanese government remained largely passive until the alliance was shaken by the former president. that of Carlos Ghosn attempt in early 2018 to merge the two groups.
Almost two years since Mr. Ghosn was arrested for financial misconduct, which he denies, Nissan has made no progress in rebalancing its capital structure, with both companies working to contain the fallout from the pandemic.
When the two companies finally resume capital talks, investors on both sides will be watching to see if Tokyo takes a more vocal stance.
Government officials could argue that politics played no role in the DBJ’s decision. Nissan wasn’t the only one receiving state-backed money to get through the coronavirus crisis. Since March, the DBJ has granted around 1.8 billion yen in emergency loans to businesses affected by Covid-19, in 149 cases.
Among automakers, Nissan’s situation was particularly dire. The company anticipates two consecutive years of losses and before plant closures around the world, it was already spending money to cut jobs and streamline its declining operations. With more than 12,000 suppliers in Japan and 140,000 employees worldwide, a fall of Nissan would have a widespread impact on the economy.
But while the argument may have some support, it is not entirely convincing. Of the 149 cases, only Nissan received government guarantees on DBJ loans. And for all of its problems, the company doesn’t face an immediate funding shortage, with nearly 2 billion yen in unused lines of credit at the end of June. Its main lender would have granted additional loans without state guarantees.
The lack of transparency adds a layer of ambiguity to a saga that already contains many unknowns regarding Mr Ghosn’s downfall and what role, if any, politics played in his ousting and the severing of ties between Nissan and Renault .
Mr. Ghosn’s close associate Greg kelly will be on trial next week to defend charges that he helped his former boss underestimate his pay.
Mr. Ghosn having fled from Tokyo to Beirut, the former Nissan legal official will be the only one to claim his innocence. But even with Mr Ghosn’s glaring absence, new information could come to light as the tribunal spends the next 10 months reviewing the global financial arrangements of its former president.
For Nissan and Renault, the lawsuit will act as a long and unwelcome distraction from the more critical activity of mending their relationship and returning to a position of cooperative strength. A greater voice from the Japanese government on the future of the alliance could be too much of a distraction.