Renault SA has made a comeback. It has closed plants, cut purchasing costs, brought out spirited new products ... and returned to the black. CEO Louis Schweitzer must keep the momentum in France going while turning his focus to Nissan Motor Co. Ltd. Renault now holds a controlling interest in the Japanese automaker and has dispatched No. 2 executive Carlos Ghosn to lead Nissan's revival. Schweitzer was interviewed Oct. 26 at Renault headquarters in Boulogne-Billancourt, near Paris, by Automotive News Europe Editor Richard Johnson and Staff Reporter Stephane Farhi.
Seven months later, are you happy with the alliance with Nissan?
Yes, we're happy about what we've done. We had made a number of assumptions based on what we had seen when we went into this deal, and what has been going on since is in line with our expectations.
The acceptance of the Nissan revival plan was a very important element. My feeling is that it was recognized as necessary by the Japanese community at large. Nissan people gave it a vote of confidence. To name it a 'revival plan' was a good idea because it's the way it's recognized at Nissan.
The strength of Carlos Ghosn is that he did not have to make an apology. He had to recognize it was not an easy thing, that it was painful but not a cold-blooded plan.
Could you have done this without Carlos Ghosn?
Either you can have a great flock of people, 200 consultants and so on, or you have to have a very limited number of people. The idea of bringing hundreds of Renault people or consultants (to Nissan) was not an adequate way to address the situation, specifically in Japan.
So you need to have a few people of very high quality. One of Ghosn's strengths is that he is very good at taking people along. We also have people going for short-time missions.
Is there any kind of strain on Renault because you sent key people to Nissan?
It's a tricky question. I consider that on the whole - we've sent 16 people or so - we have enough resources within Renault to find replacements. From the start, I said that Carlos Ghosn would be replaced by an outsider. We've found somebody who is quite different from Carlos but who is a very remarkable man and who will bring a new experience, new insights to Renault. (Pierre-Alain) De Smedt has the same job Ghosn had (executive vice president at Renault), but their profiles are very different. The only thing they have in common is that they both have worked in Latin America.
De Smedt's experience in platform management is very interesting for us because we'll do it - build cars on the same platforms in different plants - with Nissan.
Is Volkswagen a model for you?
From an engineering point of view, VW platform management is remarkable. Probably you feel they are crowding each other out at one point. With Nissan, we'll be much more modest, because we won't have four brands on the same platforms but two brands. It's simpler. The markets are also different; there is not as much geographic overlapping.
However, it's not an easy job. It means that brand identity issues have to be addressed much more formally if you have more than one brand. We have been thinking about brand management for two years. Clearly, Nissan needs to do the same.
With Nissan, we've announced that all platforms will be shared. It does not necessarily mean that all brands will use all platforms. Same thing for the engines and transmissions.
Could your alliance with Nissan lead to a system in which manufacturing, marketing and distribution would be operated by one of the two partners in a defined area? Could Renault, for example, operate the alliance in Western Europe and South America, while Nissan operates it in Asia and North America?
I would not use the word 'operate' as you do. Clearly, Nissan's manufacturing will remain under Nissan's authority; the same thing for Renault. In some places, we'll share plants, like in Mexico, Mercosur, some Asian countries.
What about the sales side?
A few principles have been decided. Dealerships, viewed from the customer side, must be separate. Dealers, meaning car retail companies, should in many cases carry both brands in separate outlets. Of course, in Europe, the Renault dealer base is stronger than Nissan's. So, it would be rather natural in a majority of cases that Nissan dealerships would be owned by people also running Renault dealerships.
Clearly, from a company point of view, there are also a number of back-office tasks (spare parts, vehicle logistics, warehouses) that can be performed in commonality between Renault and Nissan. According to the territory, the stronger partner could do it on a marginal basis for the other partner.
Why did you choose Mexico for the first implementation of the alliance?
There are not so many significant emerging markets in the world. Mexico was one of our primary targets before the alliance. Nissan offers us a remarkable opportunity there: two plants not completely used, a dealer base.
Our idea for Mexico is to build on a strong recognition of Renault identity. We were there, we left. We think we should build on innovative products. The Scenic, for example, would be a possibility. The priority is not to buy market share by selling cheap cars with negative margins in high volumes. Nissan has a pretty good market share and the local equivalent of a popular car. So we have to adjust vis-a-vis that.
At this stage, there is no plan to reintroduce the Renault brand in the U.S. and Canada. The cost to build the brand image would be irrational.
What is the situation in South America?
Life is a bit difficult in Argentina now. In Brazil, production is going up according to schedule. The Scenic is selling better than expected, but clearly we are not making money because we have too many cars in high currencies. The issue is not the market share or the volume but increasing the level of integration.
What benefits do you see in common purchasing with Nissan?
There are two sources of savings. One, of course, is the Nissan revival plan, which targets a 20 percent cost reduction in purchasing. Renault has a plan covering 1998 to 2000, and we have a next plan for the years after 2000. Those plans use commonality as one element of their success. The possibility for Renault suppliers to become Nissan suppliers will bring them extra volume and cost reduction for us, too.
There is also a nontechnical contribution for us to be in common, like benchmarking.
During the Tokyo show, Nissan President Yoshikazu Hanawa said Nissan could be a partner for Subaru. You seem to disagree. How do you solve your disagreements with Mr. Hanawa?
In this case, it's not a disagreement because it would be Nissan's decision.
Generally speaking, in the alliance agreement, we stated quite clearly that in the GAC (the global alliance committee, which gathers 12 top executives from Renault and Nissan), you could vote any way you want, but you must have an agreement of the two CEOs.
While you are building the alliance with Nissan, how will you prevent Renault from diverting from what has made up its success and recovery in recent years?
As mentioned earlier, we are not bringing an enormous number of people into Nissan. Not all the people of Renault are thinking of Japan and going to Japan every day. We have to develop long-term plans for the Renault brand and to achieve targets.
Second point: This is not a merger. People are not to build a common culture or common whatever. When there is something we feel we do better in two, it's on a result-oriented basis. It's not about building a new common company. I did not want to have a cultural gap between Nissan and Renault, but I did not want to have a common culture between Nissan and Renault. Creating a common culture is time-consuming.
We said we wanted at one point to obtain a binational group, which means people working together but with their cultural roots in both countries.
How are things going for Renault in Europe?
We hope our market share will creep up this year and in 2000.
Do you see seven-seat vehicles taking a significant part of the Scenic segment?
Marketing studies show that 10 to 15 percent of the customer base is interested in seven seats. On the other hand, the vehicle must not be too long.