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Christian Hartmann/Reuters

Renault will propose a plan to create a joint holding company that would give the French car maker and Japanese partner Nissan equal footing, the Nikkei newspaper reported on Friday.

Under the proposal, both companies would nominate a nearly equal number of directors to the new company, in which ordinary shares in both Nissan and Renault would be transferred on a balanced basis, the newspaper said without citing sources.

This would effectively dilute the French government’s Renault stake to about 7-8 per cent from 15 per cent, it added, with the new company headquartered in a third country, such as Singapore.

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Renault plans to make the proposal to Nissan soon, the Nikkei said, having modified an earlier merger idea that Nissan rejected on April 12.

Nissan declined to comment on the matter.

The Financial Times newspaper reported that Nissan and the Japanese government refused to engage in merger talks with Renault and that Nissan CEO Hiroto Saikawa had refused to meet SMCBC Nikko bankers appointed by the French car maker to work on a deal.

The outlook for the Renault-Nissan alliance – one of the world’s leading automaking partnerships – has clouded since the arrest in November of its main architect, Carlos Ghosn, for suspected financial misconduct.

A weakening financial performance at Nissan has also sparked concerns that the pursuit of overly ambitious sales targets under Ghosn, particularly in the United States, may have done lasting damage to the carmaker’s brand and profitability.

FORECAST SLASHED

This week, the Japanese company cut its profit forecast for the year just ended to its lowest in nearly a decade, citing weakness in U.S. operations.

Renault has long been vying for a closer merger with Nissan, which it rescued from the brink of bankruptcy two decades ago. Ghosn had been working to achieve deeper integration before his arrest in November.

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While the automakers have been consolidating many of their operations over the past decade, including procurement and production, many Nissan executives have opposed an all-out merger.

Instead, Nissan has argued for a more equal footing with Renault, which holds a 43 per cent stake in its bigger partner. Nissan holds a 15 per cent stake in Renault.

It was unclear whether Renault would hold the casting vote in major decisions at the new company, as it did in Renault-Nissan B.V. (RNBV), a strategic management company jointly held by both companies and which oversaw operations for the partnership.

That company was mothballed last month after an internal investigation by Nissan following Ghosn’s arrest indicated that RNBV may have been involved with financial misconduct by the former chairman.

Nissan’s partnership with Mitsubishi Motors, in which it holds a 34 per cent stake, would remain unchanged under the new proposal, the Nikkei said.

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