Alliance finding an individual way forward

Industry

TOKYO — The new strategy to put Renault, Nissan and Mitsubishi back on their feet can be summed up by how the alliance told the listening world.

The plan was laid out last week simultaneously by the three heads of the three carmakers, looped in from three locations in an international webcast conveyed in three languages, English, French and Japanese.

It was an unmistakable departure from the one-man rule of the Carlos Ghosn era, when the chairman called all the shots for all three companies.

Renault Chairman Jean-Dominique Senard, who now succeeds Ghosn as the group’s figurehead leader, took pains to convey a more consensual, balanced approach going forward.

The Franco-Japanese auto empire will run its business with each company taking on individual responsibilities, rather than the three being blended together to meet a unified goal.

Senard dismissed speculation about the possibility of a merger and a rebalancing of the companies’ cross-shareholdings, two perennial hot-button topics that have strained alliance relations since Ghosn was arrested in late 2018.

“The answer is easy,” Senard said last week while outlining the group’s new strategy. “There is no plan for a merger of companies.

“We don’t need a merger to be efficient.”

Senard also repudiated another Ghosn-era goal: to achieve ever-bigger scale through sales volume and new partners.

The alliance needs neither right now, Senard argued. Instead, the top priorities will be cutting costs, rebooting profitability and restoring trust among the three automakers.

“In a few years’ time, given what we’re doing now, this alliance is going to be the most powerful combination of companies in the world,” Senard declared. “This step today is absolutely essential.”

At the core of the plan is what the companies are calling “leader-follower.”

Renault, Nissan and Mitsubishi will divvy up technologies, segments and individual world markets into spheres of influence. One company will lead in each given area to avoid duplication and save resources.

The approach will likely increase interdependence without a full merger by allowing an individual company to hand off work in some areas to one of its partners. Under this divide-and-conquer approach, for example, Nissan will spearhead midsize crossover development for all three automakers around the world.

Key to the plan is stepped-up commonization across all three companies. In the past, the companies worked on common vehicle platforms. They are now extending that to include the upper bodies of vehicles.

The group expects big savings from that change. But at the same time, the alliance plans to cut the number of vehicle platforms by nearly half to just four. The approach will designate a “mother vehicle” to serve as the template for every other model in its segment.

The alliance reckons it can save 40 percent on product development this way. In the critical midsize crossover segment alone, Senard estimated, the companies can trim $2.2 billion in developing the next-generation models due to arrive from 2025.

Nissan, which will launch the redesigned Rogue crossover this year, will spearhead global development of that popular vehicle class for all three companies under the new setup.

The partners also will divide responsibility for developing future technologies.

Nissan will be the leader in developing electrification for midsize vehicles, in autonomous driving and in connectivity technologies for China.

Renault will assume the lead in Android-based connectivity, in electrification for small vehicles and in overall electronic architecture.

Mitsubishi is expected to focus on plug-in hybrid powertrains and minivehicles.

Meanwhile, different global markets will be called “reference regions,” where the leader company serves as a model for the most competitive practices. Nissan will take the lead in North America, China and Japan. Renault will spearhead Europe, Russia, South America and Africa. Mitsubishi will head up Southeast Asia and Oceania.

Some of the changes have been hinted at and revealed in pieces in recent months. Renault already announced its withdrawal from passenger cars in China. Renault’s difficulty in selling its Koleos crossover there shows how the leader-follow approach might offer improvement.

Nissan, which had a longer history and bigger presence in China, was scoring big in the market with a localized version of the big-selling Rogue. Renault thought it could replicate that success with the Koleos, which shares the same platform. But because of Renault’s lack of experience in China, its engineers failed to create the kind of roomy back seat that Chinese customers demand.

“We didn’t do that in the Koleos, and it was a disaster in China,” said one former Renault executive involved in the planning. “But Nissan knows that, and Nissan would have probably helped more if we had listened to what they had to say. Does it make sense to have a region with a leader? Probably yes, just for one reason: the knowledge of the markets.”

The alliance reset comes amid plunging earnings and sales at all three automakers following Ghosn’s 2018 arrest and subsequent dismissal. Mitsubishi reported a net loss for the fiscal year ended March 31, and Nissan did the same last week. Nissan’s net loss was its first in 11 years.

Meanwhile, Renault, which France’s finance minister said could “disappear” without government aid, had its corporate bond rating slashed to junk status by Moody’s in February.

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