Renault and Nissan Join Forces
29 March 1999
Renault and Nissan Join Forces to Achieve Profitable Growth for Both Companies
TOKYO, March 27 -- Louis Schweitzer, Chairman and Chief
Executive Officer of Renault, and Yoshikazu Hanawa, President and Chief
Executive Officer of Nissan Motor Co., jointly announced today a global
partnership agreement that would create the fourth largest automaker in the
world, while achieving profitable growth for both partners.
In order to support Nissan's turnaround, Renault has decided to make a
major contribution to reducing Nissan's indebtedness. Renault is, therefore,
going to invest 605 billion yen (approximately 4.7 billion euros /
FRF 31 billion / US$ 5.1 billion), by taking a 36.8% equity stake (and
corresponding voting rights) in Nissan Motor Co., by means of a reserved
capital increase at Y 400 per share, and a 22.5% stake in Nissan Diesel.
Nissan Motor will keep an identical equity participation to that of Renault in
Nissan Diesel. Renault's investment also covers a possible participation in
Automakers, Nissan's South African subsidiary, which will be proposed to the
Board of this company. Furthermore, Renault benefits from bonds with
detachable warrants for a period of 5 years. These warrants, included in the
overall price, enable Renault to maintain the level of its equity
participation or increase it within mutually agreed limits.
Nissan has the option of taking a stake in Renault's share capital at a
later date.
Further, a mutual agreement should allow Renault to purchase Nissan's
European financial subsidiaries, for a total of approximately
294 million euros (FRF 1.9 billion / Y 38 billion / US$ 320 million).
In order to strengthen Nissan's management and ensure the return to profit
for the year ending March 31, 2001, Carlos Ghosn, currently Executive Vice
President of Renault, will be appointed Chief Operating Officer of Nissan.
All the Executive Vice Presidents of the company will report to him. In
addition, two executives from Renault are appointed to the Board of Directors
of Nissan: Patrick Pelata, currently Senior Vice President, Vehicle
Development of Renault, is appointed Executive Vice President, Product
Planning and Strategy of Nissan. Thierry Moulonguet, currently Vice
President, Capital Expenditure Controller of Renault, is appointed Managing
Director, Deputy Chief Financial Officer of Nissan.
It also has been decided to propose the appointment of Yoshikazu Hanawa,
President and Chief Executive Officer of Nissan Motor Co., to the Renault
Board of Directors.
The links between Renault and Nissan will allow each partner to derive
maximum benefits from each partner's strengths. These strengths have been
carefully determined after eight months of joint assessments and will improve
the competitiveness of this new partnership.
Renault and Nissan will implement synergies covering the whole scope of
their activities, particularly in the areas of purchasing, product strategy
and research. They plan to develop a common line of platforms and
powertrains. These synergies will also apply to the strong complementarity of
their geographical locations. All expected synergies will represent a global
cost saving of US$ 3.3 billion ( FRF 20 billion / Y 390 billion /
3 billion euros) for the 2000-2002 period alone.
A transnational organization has been created to define joint strategy and
promote synergies within the new entity. A Global Alliance Committee,
consisting of the Chairman and Chief Executive Officer of Renault and the
President and Chief Executive Officer of Nissan Motor Co., together with five
top Renault executives and five top Nissan Motor Co. executives, will be in
charge of strategic direction of the partnership.
Eleven Cross Company Teams will be assigned the task of promoting all
possible synergies to be implemented by each of the partners. Four of these
teams will focus on the following areas: "Product planning and related
strategy," "Powertrains," "Vehicle Engineering," "Purchasing and logistics."
Seven other teams will be assigned to marketing and sales in different
geographical areas: Japan, Asia-Pacific, North and Central America, South
America, Europe, CIS - Turkey / Romania / North Africa, the Middle East and
sub-Saharan Africa. With the exception of the "Product planning and related
strategy" group which will be under joint leadership, each of the other groups
will be led by a manager from one company, whose appointment will be based
solely on competence and recognized expertise. The deputy leader will
automatically be an employee of the other partner.
Nissan and Renault will cooperate and comply with the national and
international procedures necessary for the implementation of the agreement
signed on March 27. The closing date for a capital transfer of funds is
scheduled for the end of May 1999.
Mr. Hanawa, President and Chief Executive Officer of Nissan Motor Co.,
stated: "The formation today of a global partnership with Renault will create
strong synergies for both of our companies. These synergies include Nissan
strength in engineering, advance technology, and our high quality and flexible
manufacturing capabilities. Nissan can learn from Renault's strong cost
reduction experience and product marketing capabilities. This will be a
strong and balanced partnership where both companies can benefit and still
retain their individual brand identities."
Mr. Schweitzer, Chairman and Chief Executive Officer of Renault, stated:
"Our alliance is based on the fit between two brands with extremely strong
personalities, the wealth of two exceptional product ranges, the recognized
expertise of both company's employees, resolutely committed to the development
and success of their companies. On the strength of its complementarity, the
new combination between Renault and Nissan becomes the fourth largest
automotive group in the world."
Nissan Motor Co., founded in 1933, is the number-two automaker in Japan.
In the fiscal year ended March 1998, Nissan recorded operating revenues of
6,564.6 billion yen (50.9 billion euros / FRF 334 billion / US$ 55.5 billion).
These operating revenues consisted of 2,757 billion yen in Japan
(21.4 billion euros / FRF 140 billion / US$ 23.3 billion ) and
3,807.6 billion yen (29.5 billion euros/ FRF 194 billion / US$ 32.2 billion )
in overseas operations. In fiscal year ended March 1998, Nissan produced
2,754,598 vehicles, consisting of 2,264,388 passenger cars and 490,210 light
commercial vehicles, and held a 20.4% market share in Japan.
In the fiscal year ended March 1998, Nissan recorded an operating income
of 84.3 billion yen (0.6 billion euros / FRF 4.3 billion / US$ 0.7 billion).
Its shareholders' equity amounts to 1,282.5 billion yen (9.9 billion euros /
FRF 65 billion / US$ 10.9 billion). Nissan's share capital is owned 58.7% by
banking facilities, 31.3% by other corporate shareholders, and 10.1% by
private shareholders. Nissan is listed on the Tokyo Stock Exchange (7201.T)
and its market value was 954.9 billion yen (7.4 billion euros /
FRF 48.5 billion / US$ 8.07 billion) as of September 30, 1998.
Nissan is a global company that has business operations in a wide range of
fields, including aerospace, industrial machinery, marine products and its
core automotive operations. The company manufactures and assembles vehicles
at 22 overseas companies in 18 countries. Nissan is known for its engineering
and technology capabilities and has R&D centers in Japan, the USA and Europe.
The company has a strong presence in Japan, USA, Europe and Asia, and has more
than 10,000 outlets in 187 countries.
Yoshikazu Hanawa (65 years old) has been President and Chief Executive
Officer of Nissan since 1996.
Renault, established in 1898, recorded revenues of 37.2 billion euros
(FRF 243.9 billion / Y 4,794 billion / US$ 40.6 billion) in 1998, 96.6% of
which were generated by its operating divisions, with the Automobile Division
accounting for 80% of revenues and the Commercial Vehicles subsidiary 16.6%.
In 1998, Renault produced 2,283,265 vehicles (up 17.7%), consisting of
1,942,733 passenger cars, 254,662 light commercial vehicles and 85,870 trucks
and buses.
Renault has reported profits every year since 1987 (with the sole
exception of 1996). The Group recorded an operating margin in 1998 of
1.9 billion euros (FRF 12.5 billion / Y 247 billion / US$ 2.1 billion), and a
net income of 1.35 billion euros (FRF 8.8 billion / Y 173 billion /
US$ 1.5 billion). Calculated as a ratio of revenues, this figure is the
highest in the European automobile industry. The Group has completely
eliminated its debt burden and now shows a net creditor situation of
1.9 billion euros (FRF 12.6 billion / Y 248 billion / US$ 2.1 billion). Its
shareholders' equity amounts to 7.9 billion euros (FRF 51.5 billion /
Y 1,013 billion / US$ 8.6 billion).
Nationalized in 1945, Renault was privatized in 1996. Its share capital
is owned 55.8 % by private shareholders (including a stake of 3.2% by Renault
employees) and 44.2% by the French State. Renault is listed on the Paris
Bourse and its market value was euro 7.8 billion (FRF 51 billion /
Y 1,000 billion / US$ 8.5 billion) on March 19, 1999.
Renault was the leading marque in Western Europe in 1998, in the area of
passenger cars and light commercial vehicles, with sales up 17.3%, rising at a
much faster rate than the total market (up 7.5%), and a volume of 1,757,565
vehicles registered. Renault is market leader in Turkey and Argentina, and
holds significant positions in Central and Eastern Europe as well as in the
Maghreb. Renault is currently pursuing a strategy of international
development which has led to it setting up a major operation in Brazil. It
also has a project underway in Russia. In the commercial vehicles sector, the
Renault V.I. group includes Mack Trucks, which covers 13% of the U.S. market.
Renault V.I. is the third largest group in the world for vehicles over
16 tons.
Louis Schweitzer (56 years old) has been Chairman and Chief Executive
Officer of Renault since 1992.