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Renault Nissan alliance aims for €1.5 billion of synergies

Ten years into their alliance, Renault and Nissan are taking cooperation to a higher level in order to create an estimated €1.5 billion of synergies.

“Over the last decade, we used the alliance to develop win-win synergies between Renault and Nissan, and that approach worked well when both were profitable and growing,” said Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance. “Today, we have to move faster. Seeking synergies is no longer optional, but mandatory. We have assigned a group of experts to focus on building greater synergies to get us through the crisis and position us competitively for the future.”

To maximize the knowledge gained from 10 years of cross-cultural management and shared experience, the Alliance has set up a dedicated team of six people from Nissan and five from Renault. They will apply their in-depth understanding of both companies to foster synergies at all levels and push for greater common activity and standardisation.

These synergies can be analyzed as follows:

• Vehicle engineering represents €279 million of total synergies through the use of common platforms and interchangeable components. Common and shared platforms currently account for 70% of the alliance’s production volume. For example, Renault and Nissan plan to use a common platform for an entry-level project in India. The use of interchangeable components on Renault and Nissan vehicles is a growing source of savings. For instance, a single core component in air conditioning systems will be used on 24 body variants on the B and C platforms.

• Research and advanced technology is expected to bring cost savings of €115 million, as the two companies coordinate efforts to avoid overlaps and improve resource allocation. For example, both Renault and Nissan’s electric vehicles will be equipped with jointly developed batteries. Renault's fuel-cell vehicle, presented last year, uses Nissan's fuel-cell technology. The two companies will also pool their efforts in technologies related to CO2 emissions, life on board, safety, and dynamic performance.

• Manufacturing and logistics are expected to account for €363 million of total synergies. The Alliance partners will continue to share manufacturing facilities to benefit from local industrial opportunities, manufacture in local currencies and optimise existing plant capacity. In 2009, for example, Renault’s plant in Brazil will produce two additional Nissan vehicles while Nissan’s plant in South Africa builds two additional Renault vehicles. By the end of 2009, a total of 11 vehicles will be cross-manufactured. In logistics, further savings will be generated in both inbound and outbound logistics by sharing additional CKD centres, vehicle components and standardizing logistics flows, particularly in Europe.

• Powertrains will generate €289 million of total synergies. The Alliance partners will boost cooperation from the exchange of engines to the co-ownership of engine families, generating savings on development, purchasing and manufacturing costs. One example is the development by Renault of new small, turbocharged petrol engines from Nissan’s engine base. So far, some 50% of powertrain components are shared.

• Purchasing synergies will generate savings of €157 million. Since April 2009, the Renault-Nissan Purchasing Organisation has handled 100% of the alliance’s purchasing requirements. To date, the focus has been on parts and raw materials, but the scope is being expanded to services. Synergy examples include brake sourcing opportunities and increasing Nissan’s sourcing in Korea to leverage the Renault/Samsung supplier network. Further savings are expected as the two companies reduce the diversity of their parts range.

• Sales and marketing synergies represent €147 million of total synergies. In media buying, for example, a single company now handles both Renault’s and Nissan’s accounts in Europe.

• Light commercial vehicles account for €102 million of identified synergies. For example, the two partners recently agreed to move to one common platform in Europe to build two differentiated light commercial vehicles.

• Information systems and support functions account for €48 million of identified synergies. In Europe, the two partners will intensify the use of available common internal resources in information systems. The two partners will further consolidate their data network infrastructure.


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