Renault Nissan Alliance

Cotina Mills

BSA 555

MBA 462

October 21, 2013

Dr. Peter Natale

CERTIFICATION OF AUTHORSHIP: By my signature, and to prevent HONOR CODE violations, I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. Through the use of APA format, I have cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.
Student Signature:
__________________________________

Cotina Mills

Table of Contents
Introduction ……………...………………………..………………………………………….. 3
Vision……………………………………………..…......……………………………………..4
Mission…………………………………………………………………………………………4
Issue…………….………….………………..………………………………………………….5
Strategy…..…………………………………..…………………………………………………7
Current Operations……………………………………………………………………………...9

Introduction Renault–Nissan Alliance is a strategic Franco-Japanese partnership between automobile manufacturers Renault, based in Paris, France, and Nissan, based in Yokohama, Japan. Together they sell more than one in 10 cars worldwide. The companies have been strategic partners since 1999 and have nearly 350,000 employees. They control seven major brands: Renault, Nissan, Infiniti, Renault Samsung Motors, Dacia, Datsun and Lada. The car group sold 8.1 million cars worldwide in 2012, behind Toyota, General Motors and Volkswagen. As of July 2013[update], the Alliance is the world's leading plug-in electric vehicle manufacturer with global sales of 100,000 units delivered since December 2010 (Renault.com, n.d.). The strategic partnership between Renault and Nissan is not a merger or an acquisition. The two companies are joined together through a cross-shareholding agreement. The structure was unique in the auto industry during the 1990s consolidation trend and later served as a model for General Motors and PSA Peugeot Citroën, PSA Peugeot Citroën and Mitsubishi, and Volkswagen and Suzuki, though the latter combination failed. The Alliance itself has broadened its scope substantially, forming additional partnerships with automakers including Germany's Daimler, China's Dongfeng Motor, and Russia's AvtoVAZ (Renault.com, n.d). The Alliance is a strategic partnership based on the rationale that, due to substantial cross-shareholding investments, each company acts in the financial interest of the other while maintaining individual brand identities and independent corporate cultures. Renault currently has a 43.4 percent stake in Nissan, and Nissan holds a 15 percent stake in Renault. Although more companies have adopted such an arrangement, it remains controversial (Renault.com, n.d.).

Vision and Mission Statements
Vision Statement
Nissan: Enriching people’s lives

Mission Statement
Nissan provides unique and innovative automotive products and services that deliver superior measurable values to all stakeholders* in alliance with Renault.
*Our stakeholders include customers, shareholders, employees, dealers, suppliers, as well as the communities where we work and operate (Renault.com, n.d.).

Issue Nissan started showing signs of decline in 1992. Its market share in the US automobile market declined to 4.7% in 1991 from 5.5% in 1980, while during the same period other Japanese automakers increased their share in the US market from 17.7% to 28.5%. In Japan also, Nissan's market share declined from 34% in 1974 to below 19% in the late 1990s. Many analysts were of the opinion that in the early 1990s, the top management at Nissan failed to take notice of changing trends in the customer tastes especially in the US, its biggest export market. Analyst David Magee stated, "Management once hailed as progressive and trend-setting was now a part of Japan's old boy network, arrogant and oblivious to market changes and customer needs." According to analysts, over capacity, high production costs, and unrelated investments were major weaknesses of Nissan during the 1990s (Renault.com, n.d.). Nissan took various steps during 1992 - 1998 to turn the company around. However none of these efforts were successful. The first restructuring plan announced in 1993 aimed at reducing over capacity but failed to achieve its objectives due to strong opposition from the labor unions to shutdown plants. Nissan launched another restructuring plan in 1995, when the manufacturing plant at Zama Island was shut down. In 1998 another plan was announced but before the plan could be implemented Nissan had to borrow $708 million from state-owned Japan Development Bank to remain operational (Renault.com, n.d.). Initially, Nissan had talks with three players - Daimler (Germany), Ford (United States) and Renault (France). Nissan was more interested in either Daimler or Ford picking up a stake in the company as both these companies were bigger and had more financial muscle than Renault which had just re-established themselves in 1997. Daimler and Ford backed out and Nissan was left with only one possible partner, Renault (Renault.com, n.d.).

Strategy Carlos Ghosn is the Chairman and CEO of the Alliance. Ghosn is a Brazilian-Lebanese-French businessman who is also Chairman and CEO of Nissan Motors and holds the same positions at Renault. Ghosn has compared the Renault–Nissan partnership to a marriage: "A couple does not assume a converged, single identity when they get married. Instead, they retain their own individuality and join to build a life together, united by shared interests and goals, each bringing something different to the union. In business, regardless of the industry, the most successful and enduring partnerships are those created with a respect for identity as the constant guiding principle” (Renault.com, n.d.) Ghosn has consistently advocated an evolutionary approach that results in increasing integration and synergies for partners within the Alliance. "You have to be careful that at the end of the day, by trying to do more in the short-term you don't end up destroying what had been delivering so much result on the mid-term and long-term, "Ghosn was quoted as saying in March 2011 Reuters Special Report, in which he said conventional, top-down acquisitions in the auto industry in the past decade have failed. "It is not validated by any example in the car industry that this works. Not one example. And saying something different is just rubbish" (Renault.com, n.d.) The goal of the Alliance is to increase economies of scale for both Renault and Nissan without forcing one company's identity to be consumed by the other's. The Alliance achieves scale and speeds time to market by jointly developing engines, batteries and other key components. For instance, Nissan’s market share increases in Europe's competitive light commercial vehicle segment have been partly a result of badging various Renault van models such as the Renault Kangoo/Nissan Kubistar, Renault Master/Nissan Interstar, Renault Trafic/Nissan Primastar. In addition, Renault builds nearly all of the diesel engines in Nissan cars sold in Europe. Nissan uses these engines to accelerate sales throughout Europe, where it has already become the number one Asian brand in many key markets (Renault.com, n.d.). Collaboration between Renault and Nissan also focuses on capital-intensive research projects such as sustainable, zero-emission transportation and development of automobile manufacturing in emerging markets such as Brazil, Russia and India. The Alliance also oversees purchasing for both companies, ensuring larger volume and thus better pricing with suppliers. Renault and Nissan have also consolidated logistics operations under the Alliance to reduce costs. The companies claim that they generate more than 200 million per year by sharing warehouses, containers, shipping crates, seagoing vessels and customs-related processing. In total, the Alliance reported more than 1.5 billion in synergies in 2010 (Renault.com, n.d.). In 2002, the Alliance created the Renault–Nissan BV (RNBV), a strategic management company to oversee areas such as corporate governance between the two companies. Based in Amsterdam, it is owned 50/50 by Renault and Nissan and provides a neutral location for the Alliance to exchange ideas, build strategy and help leverage the maximum synergies between the two companies (Renault.com, n.d.).

Current Operations The Alliance has committed $5.2 billion into its electric vehicle and battery development programs with the aim to become the leader in zero-emission transportation. Ghosn predicted that by 2020 one in 10 new car sales will be an electric vehicle. The first electric car based on this investment was the Nissan Leaf, launched in December 2010 in the United States and Japan. Between 2011 and 2012, Renault launched four electric vehicles. The Renault Kangoo Z.E. utility van, Renault Fluence Z.E., Renault Zoe, and the Renault Twizy urban quadricycle. The Nissan Leaf is the world's top selling highway-capable all-electric car in history, and it passed the global sales milestone of 50,000 units in February 2013. By July 2013 the Renault–Nissan Alliance is the world's leading plug-in electric vehicle manufacturer with global sales of 100,000 all-electric units delivered since December 2010, including more than 71,000 Nissan Leafs, about 11,000 Renault Twizys, almost 10,000 Kangoo Z.E. utility vans, about 5,000 Zoes, and over 3,000 Fluence Z.E. electric cars. The Alliance created a strategic co-operation with Daimler in 2010. The companies are joined by an equity exchange that gives the Renault–Nissan Alliance a 3.1 per cent stake in Daimler and Daimler a combined 3.1 per cent in Renault and Nissan. Renault and Daimler began working together on combined next-generation small cars: the Renault Twingo and smart fortwo, including electric versions as well as expanding both model ranges. The launches of the jointly developed small car models are scheduled to begin in 2013. Powertrain sharing will focus on fuel-efficient, diesel and petrol engines. The Alliance will provide 3- and 4-cylinder petrol and diesel engines to Daimler. The deal will allow powertrain sharing between Infiniti and Mercedes-Benz vehicles, and regional co-operation in the United States, China and Japan between Nissan, Infiniti and Daimler. Daimler will reportedly provide current 4- and 6-cylinder petrol and diesel engines to Infiniti. In January 2012, the companies announced they would jointly produce engines in Nissan's plant in Decherd, Tennessee. The collaboration marks the first production of Mercedes-Benz engines in the North America Free Trade region. The Tennessee plant’s strategic location and logistics links ensure a direct supply of engines starting in 2014 for the Mercedes-Benz C-Class, built at Daimler’s vehicle plant in Tuscaloosa, Ala. The deal marked the first time that Daimler had ever built engines in North America. The companies will together produce 250,000 4-cylinder gasoline engines in the plant. In January 2013, Renault-Nissan, Daimler and a third partner, Ford Motor Co., announced three-way development on “affordable, mass-market” hydrogen fuel cell vehicles by 2017. The companies said they would invest equal amounts into the effort. By collaborating on the fuel cell stack and other system components, Ford, Daimler and Renault-Nissan hope to improve the technology and produce at a large scale. With a higher production volume, these automakers expect to generate economies of scale and offer more affordable cars. In October 2011, the Renault–Nissan Alliance launched a $1.8 billion “Brazilian offensive” with two plants and a combined annual capacity of 580,000 vehicles per year. Nissan invested 1.5 billion to construct an all-new manufacturing facility and to develop, industrialize and launch new products in Resende, in the state of Rio de Janeiro. The all-new Nissan factory, scheduled to begin production in the first half of 2014, will have the capacity to produce up to 200,000 units annually and will create up to 2,000 jobs directly associated with the plant.
On December 12, 2012, the Renault–Nissan Alliance became the long-term controlling shareholder of AVtoVAZ, Russia’s largest car company and owner of the country's biggest selling brand, Lada. According to the terms of the deal, Renault–Nissan is investing 742 million for 67.13% of the joint venture by mid-2014. As part of the deal, Ghosn will become Chairman of the Board of the joint venture, called Alliance Rostec Auto BV. The Alliance’s market share objective in Russia is to expand from 33 per cent to 40 per cent by 2015 with AvtoVAZ. With AvtoVAZ, the Renault–Nissan Alliance builds Renault, Nissan and Lada models at its plant in Togliatti. The assembly line has a maximum capacity of 350,000 cars per year. The Alliance also has plants in Moscow, St Petersburg and Izhevsk. With the Togliatti improvements and those planned at other manufacturing complexes, Renault–Nissan and AVTOVAZ will have a Russian capacity of at least 1.7 million cars per year starting in 2016. The investment in Russia began in February 2008, when Renault acquired a 25% share in AVTOVAZ. On 18 September, 2013, the Alliance and AvtoVAZ announced the creation of a joint part-purchasing company, "Common Purchasing Organization” LLC. It is equally owned by Alliance's RNPO and the Russian manufacturer. In July 2013, Renault-Nissan CEO Carlos Ghosn confirmed the development of an all-new car platform in India to meet the demands of new car buyers in the fastest growing economies of the world. The platform, code named CMF-A (Common Module Family - Affordable), is being designed and engineered in India, and it's the first all-new vehicle platform designed jointly from the ground up by both Renault and Nissan teams. The first cars on the platform will roll out in 2015. The plant will have the capacity to produce 400,000 vehicles a year at full ramp up. Nissan has a joint-venture company with China's Dongfeng Motor Co., Ltd. to produce and sell cars throughout China. In 2011, Nissan sold 1.24 million vehicles in China, making China Nissan's top market worldwide and making Nissan the top Asian automaker in China. Executives at Dongfeng said the reason they choose Nissan was because of the company's successful integration with strategic partner Renault, which allowed each entity to remain independent and brand-focused but gaining benefits of economies of scale. Renault entered the Chinese market with Dong Feng as well, signing a memorandum of understanding in April 2012. Renault anticipates a launch of vehicle production in China by 2016. The start of Renault production in China would complete the so-called "golden triangle" between Renault, Nissan and Dongfeng envisioned when parties signed the first agreement in 2000. In July 2012, the Renault–Nissan Alliance announced it was investing 160 million in Renault Samsung Motors, the South Korean company that Renault purchased in 2000. The new investment would result in production of up to 80,000 Nissan Rogue crossover sport-utility vehicles per year at the Renault Samsung Motors plant in Busan, taking advantage of the free trade agreements of Korea with the United States and the European Union and the favorable currency exchange. The Busan plant already produces the Renault Samsung SM3, SM5 and SM7 sedans and the crossover QM5. Part of the production is exported to other markets, under the name Renault Koleos. Production of Nissan Rogue will begin in 2014. The new Renault–Nissan plant in Tangier, Morocco represents an investment of 2.5 billion with annual production capacity of 400,000 vehicles with an estimated total staff of more than 6,000 by 2015. Production of vehicles based on the Renault Logan platform began in 2012 with one production line and an initial annual output capacity of 170,000 vehicles. The Alliance has said capacity will increase to 400,000 vehicles a year but has not given a timeline. The Tangiers development is one of the largest manufacturing complexes in the Mediterranean.

References

Anonymous. (n.d.) Renault in morroco. Renault.com. Retrieved on October 19, 2013 from http:// www.renault.com/en/Groupe/renault-dans-le-monde/Pages/renault-au-maroc.aspx
Anonymous. (n.d.). The Renault-nissan alliance. Renault.com. Retrieved on October 19, 2013, from http://www.renault.com/ EN/GROUPE/L-ALLIANCE-RENAULT-NISSAN/ Pages/l-alliance-renault-nissan.aspx Jie M. & Hagiwara Y. (June 25, 2012). Ghosn’s pay rises as nissan profit beats rival japan carmakers. Bloomberg.com. Retrieved on October 19, 2013, from http://www.bloomberg.com/news/2012-06-26/ghosn-s-pay-rises-as-nissan-profit-beats-rival-japan-carmakers-.html
Anonymous. (n.d.). Nissan motor company. Nissan-Global.com. Retrieved on October 19, 2013, from http:// www.nissan-global.com
/EN/COMPANY/PROFILE/ALLIANCE/RENAULT01/index.html