Nissan, Renault need alliance more than ever
TOKYO: The coronavirus pandemic buffeting the auto industry may prove to be a watershed moment for the alliance between Renault SA and Japanese partners Nissan Motor Co and Mitsubishi Motors Corp as they prepare deep cost cuts to survive.
The car-making trio is set to unveil on May 27 a series of measures aimed at closer operational integration.
These were promised at the start of the year and have been made more urgent by the steep drop in sales and unprecedented production halts rocking the sector.
After coming close to breaking up last year, the partnership could instead be crucial for the companies to get through the global health crisis.
With Nissan and Renault also scheduled to detail their own measures on two subsequent days, they will at least have the opportunity to show progress in moving beyond last year’s management paralysis and infighting to try to reap some benefit from their decades-old partnership.
“The alliance model is incomplete, very fragile and inefficient because the companies just don’t collaborate enough,” said Jean-louis Sempe, an auto industry analyst with Invest Securities SA in Paris. “The market doesn’t understand how it works.”
Tetsuji Inoue, a spokesman for Tokyobased
Mitsubishi Motors, declined to comment. A representative for Nissan wasn’t immediately able to comment.
“We reiterate that the Alliance is essential for strategic growth and enhance competitiveness for each company,” a representative for Renault said.
Even before the virus outbreak, the companies were struggling to right the partnership and turn around slumping sales and profitability. At the end of April, Nissan warned of losses for the fiscal year that ended March and delayed its earnings announcement, which will now be released on May 28, the same day as a promised restructuring plan.
The Japanese automaker has been in turmoil since the November 2018 arrest of former Chairman Carlos Ghosn, with an aging car lineup and management upheaval.
“The more they focus on the alliance, the harder it is see through necessary restructuring measures,” said Seiji Sugiura, an analyst at Tokai Tokyo Research Center.
“At the same time they need to use the alliance.
“It’s a dilemma.”
This week’s events are critical for Renault, according to Sempe, with European car sales dropping 78% in April and the automaker turning to the French government for five billion euros in loan guarantees to bolster reserves.
The timing for Renault is delicate because Ceo-designate Luca de Meo will only officially take the helm July 1, a months-long delay following Thierry Bollore’s acrimonious ouster in October that left finance chief Clotilde Delbos in charge along with Chairman Jean-dominique Senard.
Delbos has promised two billion euros in cost-savings over three years, yet after Renault burned through five billion euros in the first quarter, pressure has increased for a detailed revamp even before De Meo arrives.
Having already acknowledged the company doesn’t have the luxury to wait, she also pledged no taboos in exploring avenues for reductions.
Renault is looking at closing factories in France, people familiar with the matter have said. The closures may include Dieppe and Les Fonderies de Bretagne, one of the people said.
“If the restructuring doesn’t include plant closures then there could be some disappointment,” Sempe said. “On the other hand, Renault can’t ask for five billion euros from France and then turn around and shut a factory.”—