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Renault and Nissan tighten knot

King Carlos: Chief executive of both Renault and Nissan, Carlos Ghosn.

Decade-old global alliance partners set to benefit from further cost savings

Nissan logo1 Jun 2009

A DECADE after forming a global alliance, Renault and Nissan have strengthened their ties in a bid to save billions of dollars a year in operating costs, but have ruled out a formal merger.

In the wake of the global downturn, Carlos Ghosn – now the CEO of both car-makers – has established a taskforce with a brief to identify €1.5 billion ($A2.6 billion) in combined savings for 2009.

And not just one-off savings, but ongoing operational synergies to squeeze more savings out of shared vehicle platforms, assembly plants and purchases.

Nissan (which has a 15 per cent stake in Renault) posted a loss of $3.5 billion for the financial year ending March 31 while Renault (which is Nissan’s biggest shareholder at 44.3 per cent) lost $483 million in 2008.

“Over the last decade, we used the alliance to develop win-win synergies between Renault and Nissan, and that approach worked well when both were profitable and growing,” Mr Ghosn said on Friday.

“We have to move faster. Seeking synergies is no longer optional, but mandatory.

“We have assigned a group of experts to focus on building greater synergies to get us through the crisis and position us competitively for the future.”

 center imageRenault's Ayrton Senna factory in Brazil, where Nissan cars will be built under closer ties.

A company statement said the new measures were being taken on the various projects to generate synergies that will continue to be effective in 2010 and beyond, but “there are no plans for a merger”.

Renault-Nissan suggested that the €1.5 billion saved between the two partners would consist of €363 million in manufacturing and logistics, €289 million in powertrains, €279 million in vehicle engineering, €157 million in purchasing, €147 million in sales and marketing, €115 million in research and advanced technology, €102 million in light commercial vehicles and €48 million information systems and support functions.

In terms of product, two additional Nissan models will be produced at Renault’s plant in Brazil from later this year while two Renaults will be built by Nissan in South Africa, making a total of 11 cross-manufactured models by the end of 2009.

Renault also plans to develop new small-capacity turbocharged petrol engines from Nissan under a program that already sees 50 per cent of powertrain components being shared.

The two companies will also use a common platform for an entry-level vehicle in India and in Europe will move to a single LCV platform, but with different bodywork and branding.

R&D savings will result from greater co-operation in the development of electric vehicle batteries and fuel cell technology while Nissan will benefit from sourcing more components from Renault’s Samsung connection in South Korea.

Renault Australia spokesman Craig Smith said the alliance had enabled Renault to return to Australia, sharing an office in Melbourne, but that the latest review was unlikely to affect the local operation.

“We’ve got a pretty close relationship (with Nissan Australia) anyway from a back-of-office point of view,” said Mr Smith. “I’m sure (the task force) will have larger priorities before they get to us.”

Despite last year’s loss by Nissan, Mr Ghosn has turned the Japanese company around since taking control a decade ago and was recently rewarded with the leadership of the French parent company.

Combined sales for the Renault-Nissan Alliance have increased from 4.9 million units in 1999 to 6.9 million units last year (including AvtoVAZ in Russia), which would make it the third-largest automotive group in the world if it was a single company.

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