SAGA OF THE NISSAN-RENAULT ALLIANCE,
PRESSURES BROUGHT RIVALS TOGETHER
Last year, the Renault-Nissan Alliance made headlines: its chairman, Carlos Ghosn, was arrested for allegedly under-reporting his income. But how did these two very different companies come to join forces in the first place? Basically, it was growth for one, survival for the other.
France-based Renault is the older of the two. Louis Renault built a prototype car in 1898, and within six months, the Renault Frères Billancourt company he started with his two brothers sold 60 cars. By the 1920s, Renault was making everything from luxury to economy cars. But when Germany invaded France in the Second World War, Louis Renault was told he could either make war supplies for the Third Reich, or simply have his factory taken away.
He decided to co-operate, and so after the war he was accused of collaborating with the Nazis and jailed in Paris. Already in poor health, he died there. Officially it was of kidney failure, but his widow claimed he was murdered. His body was later exhumed, but murder was never conclusively proven.
The automaker was nationalized under the French government, and by the early 1970s was building and selling cars globally, but without much success in the lucrative U.S. market. A Middle East oil embargo in 1973 sent fuel prices soaring, and many Americans ditched their land yachts in favour of smaller cars. Renault saw an opportunity, and in 1979 bought the struggling American Motors Corp. (AMC). Its first jointly-developed model, unveiled in 1982, was a car rather aptly named the Alliance.
But the oil embargo had created a global recession, and it hit Renault hard. To get through it, the French government put businessman Georges Besse in charge in 1985. He sold off assets and fired 21,000 employees, which helped the bottom line but made him unpopular. The following year he was gunned down outside his home, with a terrorist group claiming responsibility. In 1987, seeking to further slim Renault down, the French government sold AMC to Chrysler and left the American market.
Nissan, meanwhile, had a complicated birth. Its roots lay in the Tobata Casting Co., established in 1910, and the Kwaishinsha Motor Car Works of 1911. Kwaishinsha’s first prototype was unsuccessful, but its second one attracted three investors who named it DAT, for their initials. In 1931, Kwaishinsha’s DAT division became a subsidiary of Tobata, which spun off a separate automobile branch for it two years later. Although the cars would be known in most markets as Datsun until the 1980s, the division was named Nissan Motor Co. in 1934.
Like other Japanese manufacturers, Nissan eyed the American market, and in 1958 it brought over the Datsun 1000 sedan and pickup truck. It topped 10,000 U.S. sales in 1964 and then almost tripled that within two years. Cars such as its 240Z and Maxima helped its popularity, and in 1989, it sold more than 400,000 vehicles. But Japan’s stock market crashed in 1990, and Nissan was hit hard and couldn’t recover. By 1998, it was close to bankruptcy.
Carlos Ghosn was already at Renault by then. He’d started his career at French tire manufacturer Michelin, where he worked his way up through his ability to turn problematic departments around. By 1988 he was CEO of Michelin North America. But Michelin was family-owned and he knew he’d never displace any of its members at the top, and so in 1996, he joined Renault as executive vice-president to CEO Louis Schweitzer. At the time, Renault wasn’t in great shape: the AMC acquisition had drained it, and a planned merger with Volvo had fallen through. Ghosn earned the nickname “Le Cost-Killer” when he closed a plant and streamlined operations, but Renault regained its financial footing.
Automakers were joining forces worldwide to strengthen their positions, and in 1999, Nissan went looking for a saviour. It initially looked like DaimlerChrysler would be it, but despite Renault’s smaller size, the French automaker seemed a better fit. It had a presence in Europe where Nissan was weak, while Nissan was strong in North America, where Renault no longer operated. In 1999, Renault paid five billion euros for a 36.8-per-cent stake in Nissan. The deal also put three Renault executives on Nissan’s 10-member board of directors, and Ghosn at the head of Nissan.
“Le Cost-Killer” started in right away, laying off 21,000 Nissan workers, closing five factories, and selling the shares it held in numerous suppliers, while adding improved new vehicles. Within a year, Nissan was financially stable, and by 2005 was out of debt and turning a profit. Schweitzer retired in 2005, and Ghosn was named Renault’s president and CEO in addition to his title at Nissan.
In 2011, Nissan and Mitsubishi jointly developed compact cars for the Japanese market. The venture was successful, but Mitsubishi’s fortunes dropped when it was caught fudging fuel-economy standards. In 2016, Renault-Nissan bought 34 per cent of the weakened automaker and added it to the mix. What will happen to Carlos Ghosn is anyone’s guess, but so far, it looks like the Renault-NissanMitsubishi Alliance plans to leave its partnership just as it is.