ArrowArtboardCreated with Sketch.Title ChevronCrossEye IconFacebook IconIcon FacebookGoogle Plus IconLayer 1InstagramCreated with Sketch.Linkedin IconIcon LinkedinShapeCreated with Sketch.Icon Mail ContactPath LayerIcon MailMenu BurgerIcon Opinion QuotePositive ArrowIcon PrintRSS IconIcon SearchSite TitleTitle ChevronTwitter IconIcon TwitterYoutube Icon
Automobile

Nissan and Renault move toward closer union

But Japanese automaker remains fearful of French pressure for full integration

  © Reuters

TOKYO -- Nissan Motor and French partner Renault will combine operations in more areas, the automakers said Thursday, part of chief Carlos Ghosn's plan to ensure the nearly two-decade-old alliance will outlast him.

The two companies in April will expand their "convergence" in purchasing and engineering as well as manufacturing and logistics. Quality control and customer satisfaction, along with after-sales service, will join the list of integrated fields. New alliance member Mitsubishi Motors of Japan begins participating in this integration next month.

Renault and Nissan also will work together more closely on developing new services and technologies such as connected cars.

The efforts will link Renault and Nissan operations in most key areas, aside from sales, back-office functions and the like. The alliance aims to double annual synergies from 2016 levels to more than 10 billion euros ($12.2 billion) by 2022, the companies said.

The two automakers have moved closer together under the direction of Ghosn since the alliance began in 1999 with a capital tie-up. They have developed common parts such as chassis and engines and taken other steps to boost cost competitiveness.

This relatively loose partnership, with each complementing the other's resources, improved efficiency and helped the pair grow into a force that, together with Mitsubishi Motors, now rivals Volkswagen and Toyota Motor in global sales.

Nissan's Carlos Ghosn speaks during a presentation at the 43rd Tokyo Motor Show in Tokyo on Nov. 20, 2013.   © Reuters

But while Ghosn -- who chairs all three alliance members -- is expected to be reappointed as Renault CEO at a general shareholders meeting in June, this will give him only four more years at the helm. Ghosn told reporters Thursday that some have expressed concerns about the sustainability of the alliance but said he wants to show that it is irreversible.

Doing so will require establishing a structure that can survive his eventual departure. The accelerated convergence plan seems like a means to this end.

By doing more as a trio, "we can increase efficiency and cement the alliance's sustainability," Nissan President Hiroto Saikawa said.

Yet some interpret this latest move instead as a step toward fully combining the management of Renault and Nissan -- a longtime goal of the French government, Renault's largest shareholder, which appears keen on bringing the Japanese automaker under its sway. Nissan insiders fear intervention by the French state in the company's management. 

Paris reportedly pushed for an infusion of fresh blood into Renault's leadership when board members come up for reappointment in June. There was even speculation that Ghosn might step aside as CEO. Some suspect that Ghosn may have acceded to some of the government's demands on management integration with Nissan on the condition that he remain for another term.

French President Emmanuel Macron, whose approval rating has sunk below 50%, faces a pressing need to create jobs. He is considered keen on having Nissan increase production in France, given the Japanese company's success with building its popular Micra hatchback -- sold in Japan as the March -- at Renault's Flins factory west of Paris.

But Renault and Nissan choose where to manufacture new models by having plants worldwide compete on productivity, a method that has improved cost competitiveness. Letting the French government put its thumb on the scale could disrupt this process.

The French government and the alliance clashed in 2015 over the Florange Act, a French law that grants long-term shareholders -- in this case the state -- double voting rights in domestic companies.

While Ghosn has proved hostile to intervention by Paris, he has said the French and Japanese governments would need to agree on any changes to the alliance's capital structure. He also has indicated that a change in the three companies' cross-shareholdings is a possibility, although he maintains that no such plans have been prepared.

Renault holds a 43% stake in Nissan, which has a 15% nonvoting interest in its French partner and owns 33% of Mitsubishi Motors.

In the roughly two decades since the auto industry last underwent a major cross-border realignment, the alliance between Renault and Nissan has endured even as others more focused on capital ties have failed.

You have {{numberReadArticles}} FREE ARTICLE{{numberReadArticles-plural}} left this month

Subscribe to get unlimited access to all articles.

Get unlimited access
NAR site on phone, device, tablet

You have {{numberReadArticles}} FREE ARTICLE{{numberReadArticles-plural}} left this month

Subscribe to get unlimited access to all articles.

3 months for $9

Get unlimited access
NAR site on phone, device, tablet

Your trial period has expired

You need a subscription to...

See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

See all offers
NAR on print phone, device, and tablet media