What makes for a good marriage? - Manufacturing - Renault-Nissan alliance

Automotive Industries,  Nov, 2002  

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The number of joint ventures, alliances, partnerships--whatever you want to call them--that have taken place among automotive manufacturers over the last 20 years is mind boggling. But it's also interesting to note that in many cases, these so-called marriages have not panned out the way anyone thought, or the way the intended parties hoped they would.

I thought about this during a recent trip to see one of the newer industry marriages that is thriving. When announced, many industry observers seemed to consider the alliance between Renault and Nissan an international car wreck waiting to happen. Conventional wisdom believed cultural differences alone between the French (Renault) and the Japanese (Nissan) would bring this merger to an ugly end.

But the crash never occurred. Today, the Renault-Nissan alliance is thriving. Maybe even more startling, one of the best signs of this partnership's success is in Mexico, where (like elsewhere) English is being used as the common language for communication.

More than 25 years ago, Nissan became the first Japanese manufacturer to have a production facility in North America with the launch of its Aguascalientes, Mexico, operation. Today, the plant is flourishing as the producer of both Nissan and Renault vehicles for the Latin American marketplace.

The production of vehicles for both companies is just another step in their continuing consolidation. The merger of Renault and Nissan has proven to be successful because the two companies have leveraged their partnership to produce the greatest economies of scale.

For some reason, other partnerships have fallen short in merging their operations to the same extent. For example, there's BMW with Rover, General Motors with Isuzu and Suzuki, Hyundai with Kia or DaimlerChrysler with Mitsubishi. In nearly all of these cases, the companies remained mostly separate after their mergers--in everything from design and engineering to production in plants.

Even Peugeot and Citroen, considered among the most successful mergers, stayed separate for more than a decade before starting to act as one company. But Renault and Nissan have been working together almost since Day 1 of their merger.

Carlos Ghosn had to act quickly to get Nissan out of its financial crisis. Still, the early steps to consolidate purchasing not only provided Nissan with tremendous cost savings but also helped begin the consolidation process that provided even more benefits in the future.

While the early efforts almost exclusively aided Nissan, Renault is starting to see more and more benefits from the alliance. Case in point is Aguascalientes, where Renault is producing the Renault Clio for Mexico and Latin America.

Renault began production almost immediately, and with far less investment cost, because Nissan had a plant in Mexico with open capacity. The Clio and Nissan's Platina also share some common architecture, which eases some of the production challenges. With production and capacity on the rise at Aguascalientes, total vehicle costs are down.

That's taking advantage of economies of scales. With the continuing commonization of vehicle architecture and processing, Renault and Nissan are likely to develop a number of plants that will have the flexibility to produce any number of vehicles for either company.

Renault and Nissan may have the best marriage in the auto industry because they understand that customers want unique styling and high quality. Buyers in most cases don't know or care if dissimilar brands or models are processed or manufactured together, only that that the products remain unique.

Renaults built with Nissans, Cadillacs with Oldsmobiles, Lincolns with Fords--all will be even more common in the future as the offspring of a better marriage. *

Ron Harbour is president of Harbour and Associates, manufacturing consultants in Troy, Mich. www.harbourinc.com

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