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Renault is owing a loss of 9.5 billion euros in Nissan’s investment following a change in the way French automakers explain the holding of Japanese partners, which they are struggling with.
Renault has restructured its 26-year alliance with Nissan, gradually reducing its retention in the Japanese group, which once reached 43%, to 10%.
This process has been complicated by Nissan’s sinking stock price, falling almost 40% over the past year. Renault currently owns 36% of Nissan. This includes 18.7% stake in French trusts that they want to offload.
On Tuesday, Renault said the new accounting method will match the value of its shares to Nissan’s stock price, leading to the resulting non-cash loss for the six months ending June 30, which will be made public later this month.
“This accounting change means a significant adjustment to the Renault Group’s financial statements, but does not change the strategic and operational commitments between the Renault Group and Nissan,” Renault said.
The French group said changes caused by the application of the IFRS rules would not affect the calculation of its cash or dividends.
The extraordinary loss comes after the sudden departure of CEO Luca de Meo to run the luxury group Kering.
Before Tuesday’s update, Renault was ahead of its rivals due to US trade war exposure and growing competition in the Chinese market.
De Meo left the company as he was trying to outline the second phase of Renault’s growth strategy.
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Meanwhile, Nissan is moving forward with drastic restructuring measures, including closing seven of its 17 plants and cutting 20,000 jobs worldwide under new CEO Ivan Espinoza.
As part of the restructuring, Nissan plans to cut 250 jobs at its UK factory in Sunderland through a voluntary redundancy scheme. They also seek to support short-term cash flow positions by delaying payments to suppliers.
The Japanese group had previously held merger talks with Honda, but Renault had urged Nissan to negotiate a higher premium from its larger rivals.
Renault was open to mergers between the two Japanese groups, but the collapse of talks complicates the path to defeating Nissan’s stock.
