Nissan's Recovery

ROSINACH Pierre Hadrien

Student ID: 043V911

Date: February 8, 2005

ALLIANCE

RENAULT - NISSAN

Final Research Project

March 27th 1999 in the great auditorium of Keidanren Kaikan, in Otemachi occurred something that was going to change the way of thinking of Japanese management: a foreign company was trying to rescue Nissan, a symbol of Japanese automobile industry. Nissan Motor Company Limited, a 140 000 employee company, with foreign plants in the US, Mexico, Europe and Asia will accept the help of Renault. Only 3 years later, Nissan has become the most profitable car manufacturer in the world. We will see what happened during this short time, how the partnership between the French and the Japanese managed to be so efficient.

I A brief view of Renault and Nissan.

A/ Renault

1/ Background history

Renault has been created by Louis Renault at the end of the 19th century near Paris. At the end of World War 2, Renault has been nationalised to punish Louis Renault to have collaborated with the Nazis during the war.

One of the biggest successes of the company has been a car called 4L. A few years later, the R5 has been a great success too.

Renault is a car maker well known in France and Europe. Renault cars are often in top of sales in Europe. This company is very famous for its way to invent new concepts in car. And for its technology (Renault Sport has been famous in formula one). Indeed, many kind of cars that are common now have been invented by Renault: 4L, R5, Twingo, Espace, Avantime, Scenic...

But, because the company belonged to the State, performance and financial profitability were not the major objectives. Social peace was the most important goal for the management. As a consequence, in 1984, the state had to pay a FF 12,5 billion dept (Ђ3 billion). After this, the state started selling its shares of Renault, which so became a privatised company. But another consequence of the state's management was that the working force was unskilled, production tools were old...there has been another crisis in 1996.

Louis Schweitzer, Renault's CEO fetched Carlos Ghosn in Michelin to help him to solve the problem. Carlos Ghosn worked for 18 years in Michelin in Brazil and in the US. But, because of the "family side" of Michelin, it wasn't possible for him to become the no1 of the company. The boss of Michelin will always belong to Michelin family. That's one of the reasons that made him accept Schweitzer's offer.

With the help of Carlos Ghosn, Renault has managed to decrease the production costs of its cars by 1500Ђ per car in 3 years. Renault has become a competitive company. But they had to solve another problem.

2/ Why did Renault need Nissan?

Renault was efficient in Europe, but every time the company tried to go across the oceans, it was a failure. For example, Renault bought the American car manufacturer AMC, but a few years later, Renault sold AMC back to Chrysler after spending a large amount of money. More recently, they have tried to merge with Volvo. It has been a failure too.

But, at the end of the 90's, many mergings occurred in the automobile industry : Daimler-Benz / Chrysler; Ford/Mazda, etc...Renault was too much a small company to be independent. They had to find a partner.

It was strategic for the French car manufacturer to find a partner in America of in Japan, because the European market was already well exploited by Renault. In the US, it was impossible unless they lost their independence. The only possibility left was Japan. Toyota, Honda, Mitsubishi and Nissan were the possibilities. But Honda wanted to remain independent and Toyota was too big. Nissan and Mitsubishi Motor Corporation (MMC) were left. One of the reasons that made Mr Schweitzer and Mr Ghosn choose Nissan was that if they made a partnership with Nissan, they "only" had to discuss with the management of the firm. With MMC, they had to discuss with the conglomerate in a whole. And further than this, there were many signs that made Renault think that Nissan was really a good opportunity. Indeed, Renault was powerful in Europe and South America, where Nissan was quite weak. On the contrary, Nissan was really strong in Japan and in the US where Renault was totally absent.

In the geographical point of view, there were opportunities. But there were also opportunities on the production field. Nissan was really strong in engineering (engine, gearbox, industrial process etc.) and Renault in design, marketing, finance etc.

During the negotiations, both parts realized these facts, and started thinking that something great could be created.

The final agreement has been concluded when GM gave up (one of the reasons was that members of GM's management were afraid that buying Nissan would decrease GM's stock price, and as a consequence the management's stock options!)

B/ Nissan

1o/ why did Nissan need Renault?

During the Asian Currency Crisis (1997-1998), Japanese banks appeared in a really bad condition. Fuji Bank did not help Yamaichi Securities, even if they belonged to the same Keiretsu (to which belonged Nissan). Historically, Nissan was helped by Fuji Bank and IBJ. But IBJ was in a really bad condition. Nissan had to find help somewhere else, no more in banks. Contrary to France, Japanese government would not help Nissan.

Why not finding some help toward a Japanese car manufacturer? It was impossible. Honda and Nissan had a totally opposite way of thinking the car (Honda is very technologically axed). Toyota? Morally inconceivable for Nissan. Indeed, the only goal of Nissan for decades was to catch up Toyota (which is one of the reasons of Nissan failure: they have imitated Toyota too much, and as a consequence, they have lost their identity). Nissan had to find a foreign partner. Naturally, Nissan's director, Mr Hanawa has started searching in the US. Mr Hanawa