Nissan seen approving Renault offer; $5.3 billion would buy 35 percent of carmaker; Automaking

THE BALTIMORE SUN

TOKYO -- Nissan Motor Co., Japan's second-biggest carmaker, will accept Renault SA's $5.3 billion bid for a 35 percent stake tomorrow, the largest foreign investment in a Japanese manufacturer, analysts said yesterday.

Nissan executives will meet today to decide on the French carmaker's offer, which includes a possible stake in the Nissan Diesel Motor Co. truck unit. Nissan and Renault are set to hold a joint conference in Tokyo after Nissan's afternoon board meeting.

"It's 99.9 percent sure Nissan will approve," said Patrice Solaro, an analyst with Julius Baer France brokerage. Renault has already called meetings of analysts Monday in Paris and London.

The French carmaker would count on its cost-cutting expertise to turn around debt-laden Nissan, on course for its sixth loss in seven years. Renault, whose profit rose 63 percent last year, is ahead of schedule to reduce annual costs by $3.33 billion before 2001.

Renault could send as many as 40 executives to help turn around Nissan, union officials have said. Renault Executive Vice President Carlos Ghosn, known as "le cost-killer," will become chief operating officer at Nissan.

"It looks like they're very close to an agreement," said Simon Miller, an analyst with Credit Lyonnais Securities. "This is one of the boldest moves that any European auto manufacturer has ever made. If they get it right, the rewards will be huge."

Top Renault executives, led by Chairman Louis Schweitzer, will meet with analysts Monday in Paris at 8: 30 a.m. local time. Another meeting is scheduled for 2: 30 p.m. in London.

Renault wants to double sales by 2010 and is betting on Nissan, saddled with $37 billion in consolidated debt, to help it reach into new markets.

The French company's plans will depend on how much management it gets and the scale of Nissan's hidden debts, analysts said. There is no plan now to re-enter the U.S. market, which Renault left after selling American Motors Corp. to Chrysler Corp. in 1987, a company spokesman said.

For Nissan, it ends 18 months of talks with carmakers including DaimlerChrysler AG, which broke off talks last month.

"This is a short-term life insurance policy for Nissan," said Kaoru Kurata, an auto analyst at Goldman Sachs (Japan) Ltd. "There is a limit to how much they can support each other."

As a starter, Renault must force Nissan to cut its lineup of 50 models, cut the cost of purchased parts and maybe close a factory, analysts said. Nissan has 25 vehicle platforms, as much as the entire European auto industry, said Jeremy Tonkin, an auto analyst at Towa Securities Co.

The two companies will have to share research and development costs, and share platforms -- the engine, transmission and suspension, which are the foundation for designing a vehicle, they said.

Pub Date: 3/27/99

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