Renault controls Nissan following $5.4 billion deal

The Japanese motor giant Nissan has agreed a long-sought alliance with Renault that hands over effective control to the French carmaker in return for cash.

The deal, worth $5.4 billion, ends a year-long drama that cast Nissan, Japan's number-two carmaker, as a diminished powerhouse buckling under debts of more than two trillion yen ($16.7 billion) and urgently seeking a foreign partner. It will create the world's fourth largest carmaker though some analysts question if an alliance of one ailing carmaker and another recently restored to profitability can flourish.

"With Nissan we have a remarkable combination of complementarity and commonality," Renault chairman Mr Louis Schweitzer said. "We believe Nissan can start over again and get out of its financial problems." Renault obtained 36.8 per cent of Nissan Motor, 22.5 per cent of its truck affiliate Nissan Diesel Motor Co and the European finance subsidiaries in return for its cash infusion.

It will supply three top executives to Nissan's senior management, including Mr Carlos Ghosn, Mr Schweitzer's number two, who is credited with turning around Renault's performance. He will be Nissan's chief operating officer. Renault will also hold warrant bonds which, if exercised, could boost its stake in Nissan as high as 44 per cent, but Mr Schweizer stressed he did not want a majority stake in Nissan.

The terms are likely to reassure investors, who were hoping Renault would be able to place key people in top jobs without taking on too much exposure to Nissan's liabilities. "What's interesting about this deal is that each brings what the other lacks. Renault has financial expertise and, industrially, it knows how to develop successful vehicles," said Mr Patrice Solaro, motor analyst at Julius Baer.

"Nissan has worldwide know-how, which Renault is looking for, and it is one of the most efficient manufacturers along with Toyota in terms of developing cars rapidly that are inexpensive to assemble," he added.

Executives at both companies said that once Nissan regained its health, it was likely to take a stake in Renault. "Unfortunately, at this point, it still has to be a one-way relationship," Nissan president Mr Yoshikazu Hanawa said.

Talks between the two firms moved to the forefront this month after German-American car giant DaimlerChrysler and Nissan broke off their talks. A spokesman for DaimlerChrysler said the group might now shelve a light-truck venture with Nissan.

The French and Japanese governments hailed the deal, which marks one of the first forays by a French firm into Japan.

But some analysts worry that Renault may not be strong enough to rescue the larger Japanese company, as competition is growing fierce in Europe.