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renault nissan

The Renault‐Nissan alliance
Phases and aims

In March 1999 Renault and Nissan signed a comprehensive partnership agreement which formed a binational automobile group of global scale. This agreement was the kick‐off for a win‐win partnership because it gave Nissan on the one side the so much needed cash infusion, the alliance allowed Nissan also to concentrate on the USmarket and to enjoy synergies with Renault in Europe as well as it brought them expertise in marketing, design and platform strategy. Moreover Nissan gained from Renault's greater know‐how in small passenger cars. For Renault on the other side the alliance gave the global scope to stay competitive, so it gave them access to the Asia‐Pacific market and allowed the return to Latin‐America. The alliancealso helped to round up Renault's product portfolio, especially with Nissan's light commercial vehicles and large passenger cars. Furthermore Renault could gain from Nissan's knowhow in the manufacturing process. To sum it up the alliance showed an exceptional fit based on the partner's complementary strengths and formed the fourth largest automotive company in the world with an output of 4.9million vehicles and 9.1% market share worldwide in 1999.
From the very beginning three overwhelming principles have accompanied the alliance: To share resources in order to realize economics of scale, to leverage the complementary strengths in terms of products, markets and know‐how in order to improve efficiency and finally to preserver the separate brand identities in order to maintain a strongbrand image and appeal to a broader customer base.

These principles allowed the two companies with similar seize, but contrasting corporate cultures to pursue a common strategy of profitable growth. In detail the alliance was processed in two phases. In the first phase in 1999 Nissan took an 36.8% equity stake in Nissan for EUR 4.4bn with the option for Nissan to take a stake in Renault at alater date and for Renault to increase its shareholding to 44.4%. At this time also three directors of Renault joined the board of Nissan, among them Carlos Ghosn who was appointed chief operating officer. Ghost unveiled quickly the so‐called "Nissan Revival Plan" which aimed to restore Nissan's profitability within three years and halve its net debts. Simultaneously eleven cross‐company teams startedto identify potential synergies to be implemented which have already started to be considered eight month before the agreement. For the period 2000 to 2002 alone, the synergies should produce total savings of USD 3.4bn.

The second phase started three years later when it was announced in October 2001 and finished in May 2002 that Nissan would take a 15% stake in Renault without voting rightsand Renault would use its option to raise its shareholding. Within these transactions the French government's stake in Renault would fall to 25.9%. This phase started one year ahead of schedule because of Nissan's faster than expected progress, so the net debt was decreased from JPY 1,349bn in 1999 to only JPY 432bn in 2001. The aim of this phase was to enhance both companies' performance bycreating a community of interests, underpinned by the stronger cross shareholding. This community found its expression in the Renault‐Nissan b.v., which is equally owned by Renault and Nissan and operates under Dutch law. Renault‐Nissan b.v. handles all common strategic decisions of the alliance, from strategic planning over financial policies to the management of common subsidiaries. But still the twocompanies retain their management autonomy, their brand identities, their employees and the results of their performances. Though the second phase should strengthen the equal alliance, Renault still remains the senior partner, so e.g. the number of Nissan directors on the Renault board of directors is two out of 17, but there are now three out of seven directors of Renault on the Nissan board,...