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Renault's Senard says jobs and Nissan will be safe in Fiat deal

Under proposed merger of Fiat Chrysler and Renault, Nissan would get 7.5% of the combined entity

Tokyo

CONVINCING the stakeholders of Renault SA and Fiat Chrysler Automobiles NV on the merits of a merger may be the easy part. The hard task is selling the deal to Renault's alliance partner Nissan Motor Co, as well as labour groups and politicians wary of job cuts.

Jean-Dominique Senard, who has been tapped to lead the combined Franco-Italian carmaker, is in Tokyo to make what may be the sales pitch of his career. In an interview on Thursday, he painted a picture of a grand alliance making and selling cars across the globe, keeping people employed and churning out profits.

"It can only happen if people are open to it," said Mr Senard, 66, who attended a meeting for the board overseeing the alliance between Nissan, Renault and Mitsubishi Motors Corp. He came to explain the merits of the Fiat-Renault deal to the Japanese executives, who started Wednesday's meeting with many questions. By the end, the mood lightened and they were positive, he said.

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"A closer partnership can only improve the alliance," he said. Nissan, which has pushed back in the past at attempts for closer integration, "understood the message I brought here, although obviously they can't digest it in one night", he added.

After spending three days in Japan, Mr Senard will return to Europe to work on bringing Fiat Chrysler and Renault together. He does not anticipate any serious regulatory hurdles for the merger. Asked whether the joining of two European carmakers would result in job cuts, Mr Senard said that the deal "doesn't call for human sacrifice".

The merger will not involve any plant closures, according to Fiat, although it did not mention any potential job cuts when the deal was announced. The combination also has the blessing of the Italian and French governments, which are constantly on guard against the risk of labour unrest.

The transaction would be structured as a 50-50 ownership through a Dutch holding company, with Renault shareholders - including the French government - getting an implied premium of about 10 per cent. Renault's board is expected to give preliminary approval to the proposal as soon as next week, people familiar with the matter have said. Mr Senard said on Thursday that the deal will take about a year to complete.

Behind the push to consolidate are the various headwinds that the industry is facing. Sales are decelerating in the world's biggest car markets - China, the US and Europe - bringing fresh urgency to consolidate. Carmakers worldwide are facing intense pressure to spend heavily on electrification and autonomous vehicles, and adapting to trends such as car-sharing.

Renault and Fiat Chrysler estimated cost savings of more than five billion euros (S$7.7 billion) from the merger. The carmakers will focus on reducing platforms, simplifying product lines and focusing on quality and branding, Mr Senard said. "All of the brands are very famous," he said. "Some have to be re-enhanced."

In order to sell more cars, Mr Senard indicated that profit-eroding price cuts in North America by Nissan and Chrysler would have to end. "It needs to be about quality boosting market share," he said.

Nissan could be a key part of forging a global group that could produce 15 million vehicles a year. The Yokohama-based company would complement the merged entity because of its strong presence in China, Japan and the rest of Asia, as well as its electric-car technology.

There are signs that Mr Senard's charm offensive is yielding some results. Following the meeting, Nissan chief executive officer Hiroto Saikawa said that he saw potential opportunities for the existing alliance in Fiat Chrysler's merger proposal, though he plans to study the matter further. As Mr Saikawa put it, "we don't consider this as a minus."

As to Mr Senard, he said that Nissan is already benefiting from the proposed merger given the increase in the Japanese carmaker's shares on news of the deal. Nissan, 43 per cent owned by Renault, would also finally have more tangible influence by gaining greater say in the alliance, he said.

Under the proposed merger of Fiat Chrysler and Renault, Nissan would get 7.5 per cent of the combined entity. The Japanese carmaker would be able to vote with those shares, unlike with its current holdings, which carry no voting rights. A merger would also dilute the French state's control over Renault, and indirectly over Nissan, easing a concern that it has had for years.

Nissan needs some good news. The company recently forecast weak operating profit and cut its dividend for the first time in a decade. Mr Senard said that Nissan currently needs to focus on its profitability and that it is in Renault's interest for its Japanese partner to turn itself around.

Fiat also said that the combination would help cut costs by an additional one billion euros for Nissan and Mitsubishi Motors. BLOOMBERG