Renault-Nissan

Automotive Industries, May, 1999 by Gerry Kobe

The Renault-Nissan alliance shifts the balance of global power to six automakers with total production volume over four million units. General Motors, Ford, Toyota, Renault-Nissan, Volkswagen and DaimlerChrysler now appear to hold all the industry's cards.

But given all this, how successful is the Renault-Nissan alliance expected to be among these major players? "I'm skeptical," says industry analyst Chris Benko, a managing partner with Autofacts in Paoli, Pa. "They go together like sushi and chardonnay." He says the vast differences in corporate and national cultures, and the fact that this is not a merger but an alliance, are sticking points. It is difficult to institute change without being a major stakeholder.

The merger of the two companies also receives poor reaction from the world's financial community, which points to high risks involved for Renault in taking on a company saddled with high levels of debt.

Ultimately, this alliance differs from other recent ones, says Benko. He notes that, unlike the DaimlerChrysler deal, it is an alliance of two weaker companies. "Nissan is financially strapped and Renault is strategically challenged," Benko notes.

On paper, many positive and negative aspects of the alliance cancel each other out. For example, Renault-Nissan makes sense in emerging markets, but is weak in North America where Renault only has heavy trucks (it owns Mack) and Nissan is a distant sixth in sales. And while Renault is down to just six passenger car and two sport-utility platforms, Nissan is bloated with 27 different combinations.

The corporate goal is to develop 10 common platforms, the first of which will be the Nissan Micra/Renault Clio in 2003. They need to commonize quickly, however. Combined Renault-Nissan factory utilization is just 70.6% between 1998 and 2005, leaving 2.2 million units of unused capacity annually.

Powertrains will be commonized as well, with Nissan taking the lead role in areas of direct fuel-injection, CVTs, variable-valve timing and alternate fuels. Nissan currently has 20 combined engine/transmission combinations and Renault has seven. The goal is to have eight common power-trains overall.