Automakers Nissan Motor Co. of Japan and Renault SA of France Friday said they would intensify their alliance in an effort to cut costs due to the downturn in the global auto market.
"We have to move faster. Seeking synergies is no longer optional, but mandatory," said Carlos Ghosn, chairman and chief executive of the Renault-Nissan Alliance.
"We have assigned a group of experts to focus on building greater synergies to get us through the crisis and position us competitively for the future," he added.
The companies said they had identified synergies that will contribute EUR1.5 billion, or Y180 billion, in free cash flow divided between the partners in 2009.
"The whole purpose of the dedicated team setup within the alliance is to ensure that these synergies are not just one-shot," Renault said in response to questions from Dow Jones Newswires. "The measures taken on the various projects to generate synergies will continue to be effective in 2010 and beyond," it added.
The new team will look at ways of boosting cooperation in purchasing, sourcing, common platforms and parts, powertrains, support functions, logistics, advanced technologies and zero emissions operations.
Renault and Nissan, like peers the world over, have been hit hard by the global slump in auto sales and Ghosn, head of both companies, had already said he would look to tighten the alliance as a result.
Renault, which took a capital stake in Nissan in 1999, is now its biggest shareholder with a 44.3% interest. Nissan holds a 15% stake in Renault. "There are no plans for a merger," Renault told Dow Jones. "
Earlier this month, Nissan booked its first annual net loss since Ghosn took the helm and he warned it would make losses this year before returning to profitability the year after. Renault, whose last annual net profit fell 79%, said Nissan's fourth-quarter loss would knock EUR1.15 billion off its own first-quarter earnings.
Through the alliance, Nissan and Renault have shared platforms and powertrains, cooperated on technology, and standardized manufacturing methods. But the intensified alliance will go further.
Renault and Nissan said they identified EUR363 million of synergies in manufacturing and logistics for 2009, EUR289 million in powertrains, EUR279 million in vehicle engineering, EUR157 million in purchasing, EUR147 million in sales and marketing, EUR115 million in research and advanced technology, EUR48 million in IT and support systems and EUR102 million from cooperating on light commercial vehicles.
Among fresh measures, Renault's plant in Brazil will produce two additional Nissan vehicles in 2009, while Nissan's plant in South Africa will make two more Renault vehicles, meaning a total of 11 vehicles will be cross-manufactured by year-end.
The companies will also share more engines and platforms, with a common platform planned for their entry-level project in India. Nissan's sourcing of parts in South Korea will leverage the Renault-Samsung supplier network.
Both said sharing parts and platforms wouldn't necessarily mean a reduction in the number of models each carmaker produces. A Nissan spokesman stressed the initial aim is to cut costs. "The principle of the Alliance is that each brand remains distinct," Renault added. "In certain cases a vehicle may be cross-badged when sold on a different market; but this will remain fairly limited," told Dow Jones, without elaborating. There aren't plans for Renault to reenter the U.S. market, since Nissan is already there.
Renault shares ended Friday up EUR0.57, or 2.2%, at EUR27.06 on the Paris exchange. Nissan closed up 1.8% at Y571 on the Tokyo Stock Exchange before the alliance news.
