RENAULT and NISSAN

A Marriage of Reason
1. What is the rationale for this
alliance ?
• Globally automobile industry was consolidating and forming large
alliance was critical to leverage market power
• To be a top 5 player is crucial for long term sustainability , as 6
major player dominates 85 % of world wide sales
• Geographical synergy
• 90% of passenger car demand came from US , Europe and
Asia.
• Renault is strong in Europe, 83% of business came from there
• For Nissan 53% and 31% of the business came from APAC and
US respectively
• Alliance covers the major markets
1. What is the rationale for this alliance ? Contd..
Reciprocal
Synergy
•Both Renault and Nissan have
similar products line.
•Renault produces car for
masses and popular models of
Nissan are Datsun and Sunny
•Well equipped to develop
common platforms and common
mechanical components
Cost Reduction
Synergy
Alliance gives lot of customer
bargaining power and there by
reduces the procurement cost
Reduction in R&D cost
Having same platforms, both
companies can use each others'
factories
Perfect Financial
Sense
Renault was sitting on a pile of
cash, €1.9 billion
Nissan was having huge debt of
$21 billion with D/E ratio of 2.5
1. What is the rationale for this alliance ? Contd..

Complimentary Expertise
Renault’s Expertise Nissan s Expertise
R&D proficiencies Strong engineering capability
Design know-how Technology competency
Expertise in supply chain
rationalization
2. What is the strategic value for Renault and for Nissan

Strategic value for Renault & Nissan

Gain market position in the top 5 firm in the Automobile industry
Better quality and purchasing power will help in realizing $ 1.7 Billion in 3 years
Sharing of the capacity there by reducing the overhead cost and attain profitability
Common platforms helps in attaining cost reduction synergy

Strategic value for Renault Strategic value for Nissan

Entry into Japanese market with minimum
investment
Access to the technology and engineering capabilities
of Nissan
Better use of the valuable free cash for growth
Entry into Europe and Mercosur countries
Access to R&D and Design capabilities of Renault
Access to the supply chain expertise of Renault
3. What do you think of the agreement

• Agreement was meticulously crafted after 8 months of negotiation with all partied involved
• Renault new exactly what they want, and agreements was crafted in line with that
• Renault received shares at good discount with the available information

Total Debt of Nissan $ 21 Billion

Equity of Nissan $ 8.4 Billion
Total Asset & Liability $ 29.4 Billion
Amount paid by Renault $ 5.1 Billion
Share acquired by Renault 36.5%
By simply math of at the Balance sheet Renault should have received 17.3% stake
3. What do you think of the agreement
Renault put its trusted
managers in the CXO
positions of Nissan to drive
the change
• Mr. Carlos Ghosn became
the COO and all VPs of
Nissan reported to him
• Mr. Thierry Moulonguet ,
Director of Investments of
Nissan became the MD and
Dep. CFO of Nissan
• Executive changes
revolutionize internal
process of Nissan and made
it more agile
Cultural Aspect
• Renault worked on the
agreement without hurting
the Japanese sentiment
and didn’t project as
Nissan’s ‘Sauveur’
• Renault brought in
European and particularly
French leadership to Nissan
• Brought in more individual
accountability rather than
team/ group accountability
Mutual Respect Win-Win Situation
• Both companies agrees to • In the long run, agreement
the provision of buying turned out to be a
others shares favorable to the
• Nissan’s CEO, Mr. shareholders of both
Yokshikazu Hanawa was parties with growth and
named as the Chairman of profitability to both
Renault companies
• Synergies are developed
that benefited both parties
4. What is your assessment of the way Mr.
Ghosn and his team managed the alliance?

• Leading from the front

• Mr. Ghosn made his commitment to Nissan very clear and made it
clear that he will resign if any of the three goals are not achieved
• Flamboyant style made him the phase of the Nissan
• These posturing are significant to gain confidence of Nissan
stakeholders and Japanese population at large as he was a prior
Renault employee

• Proper structure was put in place to evaluate and promote strategy and
synergies
• Fair representation was made in the all alliance committees
• Cross company teams were constituted to find out all possible synergies.
• Importance was given for coming up innovative ideas
4. What is your assessment of the way Mr. Ghosn and his
team managed the alliance?
Process changes in Nissan
• Revolutionized the working style of Nissan
and made it Agile and dynamic.
• Embraced the use of IT systems and
reduced the decision-making time from 2
weeks to 2 hours
Work culture change
• Performance tasks were set for
individual and not for teams
• Resources were had exceed
performance to maintain the
salary as of last year
• Performance was given
preference over seniority in
promotions to key positions