| 16.8°C Dublin

Renault and Nissan rule out merger as they unveil survival plan


Renault shares surged by almost 20pc following the announcement

Renault shares surged by almost 20pc following the announcement

Renault shares surged by almost 20pc following the announcement

Renault, Nissan and Mitsubishi Motors ruled out a merger on Wednesday and instead said they would cooperate more closely on vehicle development to slash costs and salvage their troubled alliance.

The three carmakers are reeling from the coronavirus pandemic which engulfed them just as they were trying to rework their partnership following the arrest in 2018 and subsequent ousting of its chairman and chief architect, Carlos Ghosn.

Ghosn's push for Nissan to merge with Renault soured relations between the French and Japanese carmakers and the new plan is designed to serve as a peace treaty to resolve the long-standing tensions, senior sources have told Reuters.

"There is no plan for a merger of our companies," Renault chairman Jean-Dominique Senard told a news conference to unveil the new alliance strategy. "Our model today is a very distinctive model ... we don't need a merger to be efficient."

Renault shares surged by almost 20pc following the announcements.

The companies are now aiming to make savings by sharing out their production more systematically in a so-called leader-follower system, with one company leading for a particular type of vehicle and geography and the others following.

Renault and Nissan, which both posted losses last year, are hoping that reinvigorating their alliance will help keep a lid on costs, but also allow them to move ahead of rivals in areas such as electric vehicles.

Focused on competitiveness and profitability, the new strategy marks a departure from the alliance's previous blueprint for growth and volume during the Ghosn era which led to excessive manufacturing capacity and ballooning fixed costs.

Working together has posed challenges to Renault, Nissan and junior partner Mitsubishi, which joined the alliance in 2016, due to differences in corporate cultures and simmering tensions over the Alliance's capital structure.

Renault owns 43pc of Nissan while Nissan has 15pc of the French carmaker, but no voting rights. Nissan executives have strongly resisted Ghosn's drive for a full-blown merger.

The companies gave few details of how the revamp would deliver in the short term, as the car industry grapples with the fallout from the coronavirus pandemic and pressure to develop less polluting vehicles.

They said in a joint statement that they aimed to produce nearly half of their vehicles under the new leader-follower approach by 2025 and hoped to cut investment per model in the scheme by up to 40pc.

The range of vehicles they produce is expected to fall by 20pc by 2025 though the firms did not say how many jobs would go as they shift production.

Nissan will now take the lead in Japan, China and North America, Renault will be the reference for Europe, Russia, South America and North Africa while Mitsubishi will lead in Southeast Asia and Oceania, the companies said.

Business Newsletter

Read the leading stories from the world of business.

This field is required

The alliance's new production plans will include using more common parts and designs. While they have designed cars for many years on shared vehicle platforms, or bases, analysts say they have largely failed to fully capitalise on their global scale beyond joint procurement.

"The previous strategy was focused on growth and volume ... we focused as much as possible on differentiation in models to achieve growth," Alliance General Secretary Hadi Zablit told reporters. "Today we have a much higher scope of sharing between the brands."

For example, they will now use a shared design for the upper body of each company's cars, which would then be personalised to reflect the brand of the individual automakers. The upper body design would be led by a designated "leader".

Senard said the new scheme would bring savings of up to 20pc in some areas such as technology sharing.

Most Watched