The auto industry has witnessed some disastrous mergers and acquisitions. That is exactly why France's Renault and Japan's Nissan followed a different path when they conjoined in 1999.
Tight alliance of separate companies
|Promise: France's Renault and Japan's Nissan targeted billions of dollars a year in savings by combining product development, parts and material purchasing and backroom functions, starting in 1999.|
Pitfalls: Local markets still require uniquely local product and content solutions; the two separate companies still run on an "us first" competitive basis.
Essential ingredient: CEO determination to make it work. Renault and Nissan benefit from having the same resolute CEO.
Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation approach to consolidation that has failed other automakers.
Nissan and Renault are saving billions of dollars a year and creating shared future products by merging only part of the way.
Under the structure, the two automakers continue to exist as separate corporations with separate management boards. Renault owns 43.4 percent of the Japanese company. Nissan holds a 15 percent nonvoting share of the French company. The two have the same CEO, Carlos Ghosn, but he runs each company separately.
But has the alliance made Renault and Nissan more competitive?
In terms of reduced operating costs, yes. In July, the alliance announced the two partners realized 3.8 billion euros, or more than $4.08 billion, in operating synergies for the fiscal year ended March 31. That was up from $3.86 billion the previous year.
The alliance defines synergies as "cost reductions, cost avoidance and revenue increases" made possible by working together.
Ghosn says he expects operating synergies of 4.3 billion euros ($4.83 billion at current exchange rates) for the current fiscal year.
In terms of product- and platform-sharing, the alliance has been less aggressive -- at least until recently.
One strong argument for the union was the two brands had relatively little overlap in global markets. Nissan was big in the U.S. and Japan; Renault was big in Europe, South America, Africa and the Middle East. But each company insisted on determining its own direction on styling and market-segment approaches.
Sixteen years into the tie-up, the partners acknowledge it's still a work in progress.
Just two years ago, the alliance announced a strategy it calls the Common Module Family. Under that approach, Renault and Nissan will jointly develop vehicle platforms by size, with flexible specifics on styling, dimensions and powertrains. Each company has the choice whether to participate, depending on its need for a given model.
The first result, already in the works when the strategy was announced, is the current Nissan Rogue compact cross-over, developed out of global bins of components and technologies. The Rogue has become one of Nissan's hottest-selling products in the U.S. Meanwhile, Renault has obtained the Kadjar and the New Espace from the same project.
A second Common Module Family project this year created a small car for Renault in India called the Kwid and gives Nissan a new product for its Datsun brand in South Asia.
The alliance expects 70 percent of the two automakers' vehicles to come from CMF joint efforts by 2020.
The partners also still are perfecting the alliance's operating structure. Only last year, Renault and Nissan consolidated their individual management of four operating areas: purchasing, human resources, engineering and manufacturing engineering and supply-chain management. Executives from the two automakers now oversee those areas for both companies on a global alliance basis.
Commenting in July about the alliance's results, Ghosn said merging the two companies' operating functions and introducing the CMF approach are "accelerating the momentum."
But Ghosn has made it clear he has no interest in altering the ownership arrangement.
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