DETROIT: For years, France’s Renault and Japan’s Nissan struggled to make money in the global auto business.
Then came Carlos Ghosn, a Renault executive who helped to orchestrate an unprecedented transcontinental alliance, combining parts of both companies to share engineering and technology costs.
Now Ghosn’s arrest in Japan for alleged financial improprieties at Nissan could put the nearly 20-year-old alliance in jeopardy.
Ghosn, 64, born in Brazil, schooled in France and of Lebanese heritage, is set to be ousted later this week from his spot as Nissan chairman. He also could also lose his roles as CEO and chairman of Renault, threatening the alliance formed in 1999 that’s now selling more than 10 million automobiles a year.
He’s been “the glue that holds Renault and Nissan together,” Bernstein analyst Max Warburton wrote in a note to investors. “It is hard not to conclude that there may be a gulf opening up between Renault and Nissan.”
Nissan has said it will dismiss the Ghosn after he was arrested in Japan Monday for allegedly abusing company funds and misreporting his income. That opens up a leadership void at the entire alliance, for which Ghosn officially still serves as CEO and chairman.
Ghosn added Mitsubishi to the alliance two years ago after the tiny automaker was caught in a gas-mileage cheating scandal. He had even floated the idea of a full merger between the three companies.
“Today’s events throw any prospect of that up in the air,” Michael Hewson, chief market analyst at CMC Markets in London, wrote in a note to investors.
Nissan CEO Hiroto Saikawa has publicly resisted the idea of an outright merger. So, with Ghosn out at Nissan and probably Renault as well, the companies are unlikely to get any closer.
The companies now share technology, and they save money by jointly purchasing components.
While there could be some scrutiny of the relationships between the companies, they’re so intertwined now that cutting them apart would be difficult, said Kelley Blue Book analyst Michelle Krebs. “I would not predict its demise,” Krebs said of the alliance.
She said she sees further consolidation in an industry that faces unprecedented research costs for autonomous and electric vehicles, while at the same time continuing to develop cars and trucks powered by internal combustion engines.
“The last thing one of the world’s biggest automakers needs is the disruption caused by an investigation into the behavior of a man who has towered over the global auto sector,” said Michael Hewson, chief market analyst at CMC Markets in London.
Nissan’s board is to meet Thursday to consider Ghosn’s fate. Renault, where Ghosn is also CEO, said its board will hold an emergency meeting soon, and experts say it is unlikely that he will be able to stay at the company or the broader alliance.
The brash Ghosn was once viewed as a savior in the auto business with the ability to turn around the two struggling companies. In 2006 he even proposed an alliance with global giant General Motors.
Bernstein’s Warburton wrote that Ghosn’s once-mighty reputation has been declining for years, while Krebs said Nissan never could meet Ghosn’s goal of 10 percent US market share even though it has relied on “bad behavior” such as heavy discounts and sales to rental car companies.
Saikawa reiterated Nissan’s commitment to the venture, while a Renault statement expressed “dedication to the defense of Renault’s interest in the alliance.”
Ghosn’s arrest casts doubt on future of Renault-Nissan alliance
Ghosn’s arrest casts doubt on future of Renault-Nissan alliance
- Carlos Ghosn been ‘the glue that holds Renault and Nissan together,’ Bernstein analyst Max Warburton wrote in a note to investors
- With Ghosn out at Nissan and probably Renault as well, the companies are unlikely to get any closer
Global brands shut Middle East stores as conflict causes chaos
- Luxury brands and retailers close stores in Middle East
- Conflict threatens the region that has been luxury’s fastest growing
- Mass-market retailers monitor situation, adjust operations in region
PARIS: In Dubai and other major Middle Eastern shopping hubs, many stores are closed or operating with a skeleton staff as the escalating conflict in the region causes chaos for businesses and travel.
The US-Israeli air war against Iran expanded on Monday with no end in sight, with Tehran firing missiles and drones at Gulf states as it retaliates for a weekend of bombing that killed Iran’s supreme leader and reportedly killed scores of Iranian civilians, including a strike on a girls’ primary school.
Chalhoub Group, which runs 900 stores for brands from Versace and Jimmy Choo to Sephora across the region, said its stores in Bahrain were closed, while other markets, including the UAE, Saudi Arabia, and Jordan remained open though staff attendance was “voluntary.”
“We operate with a lean team formed of members who volunteered and feel comfortable to come to the store,” Chalhoub’s Vice President of Communications Lynn al Khatib told Reuters, adding that the company’s leadership team personally visited Dubai Mall and Mall of the Emirates on Monday morning to check in with workers.
E-commerce giant Amazon closed its fulfillment center operations in Abu Dhabi, suspended deliveries across the region and instructed its employees in Saudi Arabia and Jordan to remain indoors, Business Insider reported on Monday, citing an internal memo.
Gucci-owner Kering said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar and it has suspended travel to the Middle East.
Luxury growth engine under threat
Shares in luxury groups LVMH, Hermes, and Cartier-owner Richemont were down 4 percent to 5.7 percent on Monday afternoon as investors digested the knock-on impacts of the conflict.
The Middle East still accounts for a small share of global spending on luxury — between 5 percent and 10 percent, according to RBC analyst Piral Dadhania. But the region was “luxury’s brightest performer” last year, according to consultancy Bain, while sales of expensive handbags have stalled in the rest of the world.
Now, shuttered airports have put an abrupt stop to tourism flows into the region and missile strikes — including one that damaged Dubai’s five-star Fairmont Palm hotel — are likely to dissuade travelers, particularly if the conflict drags on.
“If you assume that it’s a $5 billion to $6 billion (travel retail) market and let’s say it’s going to be shut down for a month, we are talking about hundreds of millions of dollars that are definitely at risk,” said Victor Dijon, senior partner at consultancy Kearney.
If Middle Eastern shoppers cannot travel to Paris or Milan, that could also hurt luxury sales in Europe, he added.
Luxury brands have been investing in lavish new stores and exclusive events across the region. Cartier unveiled a “high-jewelry” exhibition in Dubai’s Keturah Park just days before the conflict started.
Cartier and Richemont did not reply to requests for comment.
Luxury conglomerate LVMH has also bet big on the region. Last month, its flagship brand Louis Vuitton staged an exhibition at the Jumeirah Marsa Al Arab hotel, and beauty retailer Sephora launched its first Saudi beauty brand.
LVMH does not report specific figures for the region, but in January Chief Financial Officer Cecile Cabanis said the Middle East has been “displaying significant growth.” LVMH did not reply to a request for comment on how its business may be impacted by the conflict.
The Middle East has also attracted new investment from mass-market players. Budget fashion retailer Primark said in January that it plans to open three stores in Dubai in March, April and May, followed by stores in Bahrain and Qatar by the end of the year.
“Primark is set to open its first store in Dubai at the end of March but clearly this is a fast-moving situation which we are monitoring closely,” a spokesperson for Primark-owner Associated British Foods said.
Apple stores in Dubai will remain closed until Thursday morning, the company’s website showed, while Swedish fast-fashion retailer H&M said its stores in Bahrain and Israel are closed.
Consumer goods group Reckitt has told all employees in the Middle East to work from home, temporarily closed its Bahrain manufacturing site and suspended all business travel to the region until further notice.
