Renault and Nissan Are Engaged in an Intensive Global Cooperation
20 October 1999
Following the Rapid Implementation of Their Joint Organizations, Renault and Nissan Are Engaged in an Intensive Global Cooperation
TOKYO, Oct. 20 -- Louis Schweitzer, Renault Chairman and
Chief Executive Officer, and Yoshikazu Hanawa, Nissan Chairman, President and
Chief Executive Officer, reviewed the results of the first few months of
cooperation between Renault and Nissan on Wednesday October 20, 1999, in
Tokyo.
Since May 28, 1999, date of the closing of their agreement, Renault and
Nissan have rapidly completed a number of vital stages. These relate both to
the basis of the Alliance and to the implementation of synergies between the
two groups. Work already done by the Cross Company Teams confirms the
transaction rationale and feasibility of the objective of overall savings of
$3.3 billion (FRF 20 billion / 390 billion yen / 3 billion euros) for the
2000-2002 period alone. In the longer term, these synergies would reach
$3 billion each year from 2005 onwards.
Nissan and Renault managers and engineers have rapidly established a close
working relationship marked by their joint determination to succeed, an
open-minded attitude and mutual respect and trust. The quality of this
relationship is a key asset in making a success of the Alliance. A true
complementarily of business experience and technical skills appears as a solid
foundation. Balanced relations between the two companies and the development
of strong identities for each of the brands are the core values on which the
cooperation between Renault and Nissan is being built.
Implementation of synergies between Renault and Nissan
The 12 Cross Company Teams are now all carrying out in-depth work
assessing and proposing the realization of the synergies between Nissan and
Renault. Opportunities for cooperation in the short, medium and long term
have been identified and confirm the excellent fit in terms of markets,
products, production sites and engineering capabilities. The following are
some of the areas in which the most progress has been made:
-- In the area of purchasing, Renault and Nissan are actively
establishing a coordinated purchasing policy, first in Europe, then
worldwide. Both partners are aiming for $1.7 billion in overall savings
between now and 2002. These savings cover all purchases: vehicle and
powertrain components (over 60% of the total), raw materials, tooling and
equipment, purchase of services and logistics and spare parts. This
coordinated purchasing policy is based on detailed benchmarking which
could lead to the sharing of certain sub-systems, with a dual advantage:
better products and greater purchasing power.
-- In the product planning area, a coherent combined strategy, carefully
preserving separate product and brand identities, seeks to rationalize
product range plans, in order to gain maximum benefit from the policy of
common platforms, powertrains and other components.
In the short term, the cross-badging of some products is being
established. Opportunities have been identified in the field of LCVs,
pick-ups, 4x4s and entry-level cars both in Europe and in other regions.
This should generate additional sales from 2002.
-- In the area of vehicle engineering, it has been decided to develop the
first common platform, known as the B platform, and work on it is now well
advanced. It is being developed by a team of engineers from both
companies led by Nissan, who will be the first to use it. Respecting the
specific identities of each brand and particularities of each product, it
will be used as a base for the vehicles replacing the Nissan Micra, March
and Cube and the Renault Twingo and Clio. The first vehicles to be
assembled on this platform will be introduced in 2002. The policy of
building common platforms, on which each brand will develop its own
specific product range, will be continued in the coming years and Renault
and Nissan are looking to have 10 common platforms by 2010. By developing
its own vehicles on these platforms, each brand will generate considerable
economies of scale, increasing to 500,000 units the average production
volume for a platform, compared to 280,000 currently at Renault and
100,000 at Nissan. In the case of a large-volume segment such as the B
segment, overall forecast volumes on the B platform will exceed one
million a year. In addition, other components will be shared insofar as
they do not affect brand differentiation.
Renault and Nissan are also starting a joint study in the area of
research and advanced engineering, notably in vehicle weight reduction,
hybrid vehicles and X-by-wire systems.
-- In the area of powertrains, Nissan and Renault are also seeking to
rationalize and make better joint use of their ranges of engines and
transmissions, at highly competitive prices. The objective for 2010 is an
average production volume of more than 500,000 units per powertrain family
based on a common range of engine families. This figure could reach a
million units for mainstream powertrains (versus 320,000 units on average
currently at Renault and 140,000 at Nissan). Teams have started to study
and make action plans for this strategy and have already addressed
together important issues:
-- joint development of a new small diesel engine;
-- use by Renault of Nissan's V6 engine;
-- in the area of transmissions, Renault will use four-wheel drive
units from Nissan and CVT technology from JATCO TransTechnology
Ltd. Nissan will use manual transmissions from Renault for its
small vehicles;
-- other joint developments are currently being considered.
-- In Europe, Renault and Nissan are jointly setting up a new policy for
their distribution system by using more powerful major joint dealers
managing local networks of separate dealerships in a given territory.
This strategy will allow each partner to boost its revenues and reduce
distribution costs, while maintaining separate brand identities through
separate outlets. Renault and Nissan's objective is to restructure and to
strengthen the European network by mid-2002.
Reducing distribution costs will not be limited to the dealer network:
Renault and Nissan want to identify and implement back office synergies
(for instance parts and vehicle logistics) between the two companies at a
national and European level which can minimize the structural costs of
distribution. Both Renault and Nissan will retain their own sales force
and marketing organizations to maximize the sales potential of the Renault
and Nissan brands.
-- At the end of September, the GAC approved a project for cooperation
between Nissan and Renault in Mexico. The project provides for Renault's
return to the Mexican market as well as assembly by Nissan of Renault
products in Mexico. A specific Renault distribution network will be
developed, with support from Nissan. This project ensures a better
utilization of Nissan's industrial capacity and allows Renault to move
back into a major high-growth market in the most cost-effective way
possible. For the sales area, as Nissan is the only major car
manufacturer not having a sales finance company in Mexico, both partners
are working with Renault Credit International (RCI) to set up a Mexican
sales finance company. Renault and Nissan hope to be able to announce a
final decision at the Mexico Motor Show in December.
-- In South America (Mercosur), Renault and Nissan are establishing a
project which will include a wide cooperation in the area of sales,
purchasing and manufacturing.
-- Nissan and Renault have determined a potential future cooperation in
South Africa, based on Automakers, Nissan's South African subsidiary.
-- In the Asia-Pacific region, cooperation will start soon in Australia
with Renault vehicles being sold through the Nissan network from the end
of 2000. In other countries in the region, such as Malaysia, the
Philippines, Taiwan and Thailand, where Nissan is mostly represented by
independent companies, Renault would develop its operations with these
companies, including industrial and commercial cooperation and with
support from Nissan.
-- In Japan, when the contract between Renault and its current importer,
the Yanase / France Motors group, comes to an end on May 1, 2000,
Renault's intention, which is under study with the different parties, is
to import its own vehicles using Nissan's back-office resources
(homologation, preparation, storage, transport..). It would sell them
through two non-exclusive distribution networks: the Yanase / France
Motors network and a part of the Nissan network. Through this approach,
Renault's intention is to sell ten times as many vehicles in the medium
term and to target annual sales volumes of 30,000 vehicles or even more
The work being carried out by the GAC through the CCTs is based on an
overall strategic vision, which aims to promote global profitable growth for
the Renault-Nissan Alliance. It is supported by the Alliance's
decision-making, coordination and implementation structures put into place
very quickly and all operational since the end of June.
Decision-making and coordination structures of the Alliance
The Global Alliance Committee, which met on an informal basis for the
first time on June 9, met again in Tokyo on July 28, then in Paris on
September 22, and is now convening on a monthly basis. The G.A.C. is the
governing body of the Alliance. It defines joint strategy and decides on the
implementation of cooperation or synergies proposed by the Cross Company
Teams. The G.A.C. is chaired by Louis Schweitzer, Renault Chairman and Chief
Executive Officer, and Yoshikazu Hanawa, Nissan Chairman, President and Chief
Executive Officer.
The 11 Cross Company Teams provided for in the agreement were all
operational by the end of June. A twelfth CCT dedicated to manufacturing was
set up in July to make plans for implementation of the major synergies
identified in this area. The CCTs work together on an ongoing basis. The
Product Planning CCT is under joint leadership from Nissan and Renault. For
the other ones, the leaders are from either Nissan or Renault and work jointly
with a deputy leader from the other company. Each CCT includes in addition a
pilot and a pilot counterpart. Both are responsible for the day-to-day work
of their CCT and coordination of a team comprising 6 to 15 members. A total
of about 150 staff from Renault and Nissan are involved in CCT work.
In each company, the work carried out by the CCTs is coordinated by a
Steering Committee which bring together approximately every two weeks the
leaders or deputy leaders of the CCTs in the company. Chaired at Renault by
Georges Douin, Executive Vice President, and at Nissan by Patrick Pelata,
Executive Vice President, the Steering Committees prepare for the G.A.C. under
the leadership of the Alliance Coordination Bureau which centralizes
information, assesses requirements and coordinates CCT work. The Bureau has
an office in Paris headed by Yutaka Suzuki, and an office in Tokyo, headed by
Akira Ishii. Functional Task Teams also provide everyday assistance to the
CCTs, particularly in the area of information systems, engineering standards,
quality, and fiscal and legal affairs.
Finally, an Alliance Charter has been drawn up for members involved in
both companies. It aims to promote the new group's common values, namely a
shared ambition, mutual trust, a respect for differences and a balance between
the two partners, together with confidentiality and operating rules.
Capital contributions and equity participations
On May 28, 1999, by means of a reserved capital increase at 400 yen per
share, Renault contributed 590.7 billion yen to the capital of Nissan Motor
(FRF 29.9 billion / 4.6 billion euros / $ 4.86 billion) (1) and 9.3 billion
yen (FRF 471 million / 71.8 million euros / $ 76.6 million) to the capital of
Nissan Diesel.
Renault acquired a 36.8% equity stake in Nissan Motor and a 22.5% stake in
Nissan Diesel (2). In addition, Renault acquired Nissan's five financial
subsidiaries in Europe (3) for a total of 286 million euros (FRF 1.87 billion
/ 37.8 billion yen / $ 305 million). Renault has invested a total of FRF
32.2 billion (637.8 billion yen / 4.9 billion euros / $ 5.2 billion). The
positive trend in the Nissan share which reflects the market's confidence in
Nissan's ability to achieve a turnaround and in the Renault-Nissan Alliance,
added 61.2% in value (as of September 30) to Renault's investment in Nissan's
capital.
Renault's capital contribution greatly helped reduce the indebtedness of
Nissan. On its side, thanks to its net creditor situation at the end of 1998
and to the cash flow generated during the first half of 1999, Renault managed
to limit the impact of its investment in Nissan on its own balance sheet and
keep a sound financial situation, with debt of FRF 10.2 billion
(171 billion yen / 1.6 billion euros / $ 1.6 billion) on June 30, 1999,
equivalent to 18.6% of shareholders' equity.
The Renault Annual General Meeting of shareholders was informed on the
agreement on June 10,1999 and the Nissan Annual General Meeting of
shareholders was informed on June 25, 1999. The agreement provides for the
possibility of Nissan taking an equity participation in Renault at a later
date.
(1) Franc / dollar exchange rate (September 30, 1999): $1 = FRF 6.15
(2) Renault's acquisition of a 22.5% equity participation in Nissan
Diesel, identical to that of Nissan Motor's, was carried out in two phases:
15.2% when the agreement was closed and 7.3% on July 6 by subscribing to a
reserved capital increase.
(3) In Germany, the United Kingdom, Italy, Spain and the Netherlands.
Management structure and exchange of personnel
The Annual General Meeting of Nissan shareholders approved Carlos Ghosn's
appointment to the Nissan Board of Directors on June 25, 1999. He immediately
assumed his duties as Chief Operating Officer of Nissan. Patrick Pelata,
appointed Executive Vice President in charge of Product Planning, Design and
Strategy, and Thierry Moulonguet, named Deputy Chief Financial Officer, also
joined the Nissan Board.
The Annual General Meeting of Renault shareholders appointed Yoshikazu
Hanawa, Chairman, President and Chief Executive Officer of Nissan Motor, to
the Renault Board of Directors on June 10, 1999. Mr. Hanawa has served on the
Renault Board since that date. Further, Tsutomu Sawada, appointed Senior Vice
President, Adviser to the Chairman, joined the Renault Management Committee
(CDR) on September 1, 1999, and Mr. Yutaka Suzuki was appointed Senior Vice
President, Alliance Coordination Bureau.
Seventeen Renault people have joined Nissan at management level and one
more is expected in the course of 1999. They have been appointed in the
following sectors: office of the COO, international human resources, finance
and treasury, corporate planning, product planning, purchasing, manufacturing
and engineering, marketing and South American operations. Seven Nissan people
have joined the ranks of Renault's management and 14 others are expected to
follow before the end 1999. They have been appointed in the following
sectors: Alliance Coordination Bureau, quality, project management, marketing
and human resources.
Composition of the Global Alliance Committee and Cross Company Teams
The Global Alliance Committee (GAC) is chaired by Louis Schweitzer,
Renault Chairman and Chief Executive Officer, and Yoshikazu Hanawa, Nissan
Chairman, President and Chief Executive Officer. Messrs. Georges Douin
(Executive Vice President, Product & Strategic Planning and International
Operations), Francois Hinfray (Executive Vice President, Sales & Marketing),
Shemaya Levy (Executive Vice President), Michel de Virville (Secretary
General, Human Resources) and Pierre-Alain de Smedt (Executive Vice President)
represent Renault. Messrs. Carlos Ghosn (Chief Operating Officer), Kanemitsu
Anraku (Executive Vice President, Chief Financial Officer), Norio Matsumura
(Executive Vice President, Overseas Operations), Nobuo Ookubo (Executive Vice
President, Technology and Engineering Development) and Patrick Pelata
(Executive Vice President, Product Planning, Design and Strategy) represent
Nissan.
The Cross Company Teams (CCT) are headed by a leader from either Renault
or Nissan, assisted by a deputy leader from the other company, except Product
Planning CCT which is under joint leadership. Each CCT also includes a pilot
who is from the same company as the leader of the CCT and a counterpart pilot
from the other company, both responsible for the day-to-day work of their CCT
and leadership of a team of between 6 and 15 members.
The Product Planning & Related Strategy CCT is under the joint leadership
of Remi Deconinck, Vice President, Renault Product Planning, and Eiji Imai,
Senior Vice President, Nissan Product Planning.
The Vehicle Engineering CCT is led by Jacques Lacambre, Senior Vice
President, Advanced Vehicle Engineering. The deputy leader is Iwao Nakamura,
Senior Vice President at Nissan.
The Powertrains CCT is headed by Hajime Kawasaki, Nissan Senior Vice
President. Gerard Detourbet, Senior Vice President, Renault Powertrains, is
deputy leader.
The Purchase & Supply CCT is headed by Jean Baptiste Duzan, Senior Vice
President, Renault Purchasing. Itaru Koeda, Executive Vice President, Nissan,
is deputy leader.
The Manufacturing CCT is headed by Hisayoshi Kojima, Executive Vice
President, Nissan Manufacturing. Michel Gornet, Senior Vice President,
Renault Manufacturing, is deputy leader.
The Europe CCT is headed by Philippe Mellier, Senior Vice President,
Market Area Europe, at Renault. The deputy leader is Sir Ian Gibson,
President of Nissan Europe.
The Mexico and Central America CCT is led by Hiroshi Yoshioka, President
of NISMEX. The deputy leader is Patrice Ratti, Director, Mexico, Central
America and Caribbean, at Renault.
The South America CCT is led by Luc Alexandre Menard, Senior Vice
President, Renault Mercosur Division, with Toshio Aoki, General Manager,
Nissan Americas Operations Division, as deputy leader.
The Japan CCT is headed by Tetsuaki Abe, Senior Vice President, Nissan.
Gerard Saint-Martin, Director, Asia-Pacific, Renault, is deputy leader.
The Asia-Oceania CCT is headed by Yoshi Iwashita, Senior Vice President of
Nissan. The deputy leaders are Gerard Saint-Martin, Director, Asia-Pacific,
and Jacques Daniel, Director, China, at Renault.
The Sub-Saharan Africa and Middle East CCT is led by Toyohiko Masuda,
General Manager, Middle East and Africa Operations Division at Nissan. The
deputy leader is Myrtille d'Humieres, Director in charge of International
Projects at Renault.
The CIS, Turkey, Romania, North Africa is led by Manuel Gomez, Senior Vice
President, Renault International Operations. Toshinaga Koizumi, Senior Vice
President of Nissan is deputy leader.