Nissan Renault

Renault-Nissan
The Paradoxical Alliance
Case study
Reference no ESMT-305-0047-1

This case was written by Piero Morosini, European School of Management and
Technology. It is intended to be used as the basis for class discussion rather than
to illustrate either effective or ineffective handling of a management situation.
The case was compiled from published sources.
© 2005, EuropeanSchool of Management and Technology.
No part of this publication may be copied, stored, transmitted, reproduced
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ESMT-305-0047-1
Ref. 2005-case-18

Renault-Nissan: Nurturing a Successful Alliance Across Boundaries

I. Introduction
It was late March 1999. As a seasoned executive of a global corporation, General Motors vice-chairman Bob Lutz
knew that well over 50 percent of alliances were destined for failure.Especially those taking place across such
distant – and distinctive – national cultures as the French and the Japanese cultures. These thoughts were
undoubtedly in his mind as he learned that the French company Renault had just bought a 36.6 percent stake in
Japanese Nissan for USD 5.4 billion to form an alliance between the two companies. His remark to a journalist
became instant news:
“Renaultwould be better off buying USD 5 billion of gold bars, putting them on a ship and dumping them in the
middle of the Pacific.”1
Bob Lutz was not alone in his opinion. The international media, company executives, management academics and
consultants all over the world were nearly unanimous in their disapproval of the Renault-Nissan alliance. A sample
of their comments gives a sense of their mainconcerns:
“Much has been made of the culture clash between [the May 1998 merging partners] Daimler and Chrysler but it will
be nothing compared to Nissan and Renault. At their core, they are both nationalistic and patriotic, and each
believes its way is the right way to do things. We will have quite a teething period for the first year or two as they feel
each other out.”
“Two mules don’tmake a race-horse.”
“I would have preferred Renault to take 51 percent even if it meant having to assume Nissan’s debt on its balance
sheet. That way Renault could have become the real boss and set some firm direction, rather than having to
negotiate.”
“French taxpayers might be left footing the bill for Renault, whose top managers were perhaps blinded by the
brilliance of their own vision.”“Even the most optimistic observers reckon that the payoff horizon – assuming that the alliance could overcome its
enormous business and cultural hurdles – would be long-term, not short.” 2
Not only did mainstream managerial theories support these concerns fully: there were also Renault and Nissan
themselves. On the one hand, Renault had just been taken off the losers’ league of automakersfollowing a
remarkable comeback that was turning losses of USD 680 million in 1996 into combined profits of USD 1.65 billion in
1998 and 1999. In addition, Renault was still recovering from a highly publicized failure to merge with Volvo in 1995.
A distinctively French and European carmaker, Renault had never run a global operation: in 1998 the company sold
no cars in the U.S. and only 2,476 units inJapan, the world’s two largest automotive markets.
On the other hand, Nissan was nearly bankrupt in 1999. Since 1991 it had been losing money and market share
continuously, and car production had dropped by 600,000 units. The latter meant that Nissan’s factories were
running at a 53 percent capacity utilization. The company’s product portfolio was aging, and it had ten times the
number of...