Raw Japan

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Nissan and Renault: 10 years to celebrate?

March 27, 2009


Ten years ago today, French carmaker Renault bought a 37 percent stake in Nissan Motor for $5 billion, making a big bet in the debt-riddled Japanese company with the goal of one day becoming a major player in the global auto industry.

Ever since Nissan staged a spectacular turnaround in just two years, the Franco-Japanese union has been lauded as the only alliance that worked after many failed attempts by other automakers. The success story turned Carlos Ghosn, who has served as CEO of both companies since 2005, into one of the most celebrated and visible auto executives.

Ironic, then, that this was the year that Mr Ghosn, who has held a dual-CEO role at both companies since 2005, admitted that cooperation to date had not gone far enough.

As my colleague and I wrote last month, the optimism surrounding the alliance has faded of late. Nissan and Renault, much like the rest of the industry, face a dearth of cash that has forced them to cancel some joint projects over the next few years. And a closer look revealed that the two companies hadn’t really been optimising the synergies that could have been, having faced the same problems that companies face when they try to remain independent: a clash of interests and people hailing from old, traditional entities with a rich history.

SINGAPORE/“The problem is normally only human beings, especially those human beings called engineers,” one Nissan official told me recently. “Engineers like to invent and the problem is to channel that energy into creating something that could be common for the two companies.”

That is precisely why Nissan and Renault have gone separate ways when developing many vehicles that could have shared body structures and parts and saved money for both. Even the much-hyped joint electric car project will start on separate car “platforms” in the beginning, and merged only after a few years under the partners’ new initiative to summon more synergies to stop the cash-bleed. (Specific steps on how to do that are to be announced in May.)


But that’s not the story the alliance wants to tell. In a press release to recognise their 10-year anniversary today, Nissan and Renault listed a number of achievements, one of which was the growth in market capitalisation.

According to the statement, Renault’s market cap more than tripled to $37 billion, ranking it sixth in the car industry, compared to 11th in 1999. Nissan’s quadrupled to $46 billion over the same period, ranking it fifth vs 10th.

The problem was, they measured only up to 2007.

When I asked Nissan why, I was told that using 2007 made more sense to “omit the negative impact of the crisis to the industry as a whole.”

Fair enough. Unfortunately, it still doesn’t change the fact that Nissan’s shares have fallen harder than Toyota’s or Honda’s during the current crisis — both with no strategic partners of their own — and to a level below a time when the company was feared to go under.

Where do the partners stand today? According to investors, Nissan is worth $17.8 billion and Renault just $6.3 billion, ranking them number seven and 13. So Nissan moved up and Renault went down. It’ll be interesting to see where the alliance will be in 10 years’ time.

Photo credits: Yuriko Nakao/REUTERS; Vivek Prakash/REUTERS; Vincent Kessler/REUTERS

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