Executive Summary

This report is an endeavor to analyze the case, Renault/ Nissan: The Making of a Global Alliance
fro !uan resource, Marketing, "perations and #inance point of vie$%
&e have first given an introduction that gives us a sneak peek through Nissan's tieline% &e get an
idea of ho$ the idea of the Global Alliance $as conceptualized and $hat $ere the challenges faced%
(ater $e have e)ained the *ndustry analysis and coparison bet$een +hrysler and Renault on the
basis of ,trengths, &eakness, Threats and "pportunities%
*n the later part $e have discussed the "perations, Marketing, #inance and !R perspective on the
alliance, and the alliance process%
At the end $e have stated the lessons learnt fro the case%
To enable better understanding of the report, especially the financial analysis $e have attached an
Appendi) at the end of the docuent%
1
Introduction
Background:
Nissan Motor +o% (td $as established in -.// by 0oshisuke Aika$al to anufacture and sell sall
1atsun passenger cars and auto parts%
The first sall sized 1atsun passenger car $as rolled out in April -./2 at 0okohaa 3lant% *t $as a
sybol of 4apan's rapid industrialization% *n -./5, the signs of $ar gre$ stronger and the focus
shifted fro passenger cars to ilitary trucks% 3ost $ar Nissan suffered losses because any auto
dealers s$itched to Toyota after the dissolution of 4apan's Motor 6ehicle 1istribution +o% (iited%
Nissan resued the production of Nissan trucks in -.72 1atsun passenger cars in -.78% *n -.29
:luebird and the -.5; +edric captivated the iagination of 4apanese car buyers and <uickened the
pace of otorization in 4apan% The ,unny $as introduced in -.5;% All these cars $ere to deal $ith
the copetitor Toyota% *n -.5- Nissan began overseas e)pansion%-.8;'s energy crisis increased the
deand for 4apanese sall cars%
The attept by Takashi *shihara to ste declining sales of Nissan by e)panding abroad $as not very
$ell received by the 4apanese unions and this affected the :rand iage of Nissan% 0utaka =ue the
ne)t president of Nissan tried to handle the situation by iproving the $ork environent and
introducing the first nae culture% !e started the botto up approach $hile developing a ne$ odel
of cars but this lead in the loss of direction in the overall policy for odel developent% &ith the
burst of 4apan's bubble econoy, Nissan's sales plueted%
0oshikazu !ana$a becae the -7
th
3resident of Nissan and he $as very concerned about the
coplacent nature of Nissan in spite of the poor arkets and financial perforance% !e $anted to
change the organization culture and ake it ore fle)ible so that eployees $ork closer to the
custoers and not >ust focus on their o$n line of business%
After the end of the -..9 4apanese fiscal year, Nissan's +orporate 3lanning 1epartent presented
?Global :usiness Refor 3lan@ to !ana$a and the :oard% *n this presentation they highlighted
Nissan's losses and put forth t$o options: -A ipleent an independent survival plan by do$nsizing
or BA foration of a Global Alliance%
2
*n a Global Alliance, Nissan had to find a partner $ho $ould share its kno$ho$ $ith Nissan and not
doinate Also they had to coe out of their financial crisis% Therefore they $ere considering
different options and finally they collaborated $ith Renault% The case deals $ith the entire process of
the erger
Industry Analysis (Change Drivers)
Ma>or changes $hich took place in the autoobile industry:
C There $as a round of large scale mergers the $orld over that created a stor in the autoobile
teacup%
C An Asian slowdown priarily in the financial arkets had an adverse effect on the 4apanese auto
a>ors in particular%
C An irreversible shift to$ards globalization $as s$eeping the auto industry and $as changing the
$ay the players in the industry operated%
C Economic and olitical olicies in Durope $ere changing% Ma>or scale synergy $as encouraged by
the industrial policy prevalent in Durope in the -..;s% This $as iportant for Renault since it $as
o$ned by the #rench state%
C !ver"caacity: There $as a lot of overEcapacity in the global auto arket% The deand the $orld
over $as only 2B illion vehicles, $hile the e)isting capacity $as 8;illion vehicles%
Region +apacity 3roduction Ftilization
4apan B;;;;;; -5;;;;; 9;
Rest of Asia B5;;;; -;5;;; 7-
N% Aerica 8B;;;; 2;;;;; 5.
Durope 7/;;;; B9;;;; 52
Total /7-;;;; B795;;; 8/
Nissan's capacity Ftilization
2
C There $ere stricter environmental and sa#ety regulations that increased RG1 costs per car%
Global overEcapacity $ithin autootive industry and rising costs per vehicle ade it
increasing iportant for industry players to seek size through strategic partnerships or ergers%
#ord's ac<uisition of 6olvo in -..9, 6olks$agen AG deal and the erger of 1ailer and +hrysler
sent signal to the industry that served to accelerate the trend% To cope $ith this industry transitions,
the copanies $ere looking to for strategic alliances $hich $ould help to achieve profitable
gro$th%
Comarison $etween Chrysler and %enault:
At that tie, +hrysler and Renault $ere the potential partners for the alliance% The analysis belo$
helps us to deterine the fir best suited for alliance%
Strengths o# %enault
Renault is ahead of its copetition in its idErange and light coercial vehicles% Their
saller vehicles are functional, reliable, and stylish%
The cost at $hich the vehicles $ere produced $as also ipressive% Renault has long been
kno$n for this e)cellent cost control% They $ere able to keep their costs lo$ by offering a
liited nuber of platfors and engine and transission platfors%
,uperiority in design, style and innovation% This resulted in high custoer satisfaction%
Renault had a strong presence in &estern Durope and ,outh Aerica% *n -..9 Renault o$ned
--H or the arket share in &estern Durope% The sall and idsized cars produced there
$ere $idely accepted%
Renault $as running successfully post turnaround under the leadership of +arlos Ghosn%
Globalised strategy for platfors and purchasing%
There $ere B- identified areas of synergy bet$een Nissan and Renault%
&eaknesses o# %enault
The brand a$areness of Renault in 4apan $as very lo$%
Renault did not build cash reserves over the yearsI therefore it $ould be difficult for the to
pay off Nissan's debts%
2
(o$ capital copared to Nissan%
!istory as a publicEsector copany $ith large financial deficits%
The organizational structure of Renault $as different fro that of Nissan for e): there $as no
concept of +"" in 4apan%
Strengths o# Chrysler
*t had the financial po$er to pay off Nissan's debts%
*t had a arket share of -9H in F,A in -..9 copared to Nissan's 7H%
The brand a$areness of 1ailerE+hrysler $as high aong global autoakers% Renault had
poor brand identity in 4apan%
&eakness o# Chrysler
+hrysler's ain ai $as to take over Nissan 1iesel to build trucks% *t had no vie$ of
leveraging on the synergies that e)isted bet$een the t$o copanies%
*n addition to the strengths entioned above, the added advantages of an alliance $ith Renault $ere
agreed ters of e<ual position, retained individual brand identity and anageent D)pertise J+arlos
GhosnA $hich ade Renault the ideal partner for the alliance%
!ortunities
The concept of Globalization $as rapant during the late -..;'s and it provided
opportunities for copanies to achieve econoies of scale, geographic e)pansion, cost
reduction, increased profit argin and increased global presence etc%
4apanese auto industry as such had the opportunity to learn fro Duropean copanies in
ters of operation, design, arketing etc $hich $ere the strengths of Renault% Renault also
had scope to learn lot of intricacies of the 4apanese auto industry%
'hreats
1ailer+hrysler ac<uiring Nissan $ill lead to industrial restructuring in 4apan%
4apanese culture in ters of running a business and understanding the people is different
fro Duropean culture%
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,trict environental and safety regulations that $ill result in increased RG1 costs%
Global overcapacity in the autootive industry% The supply of vehicles $as ore than
deand%
Structure o# the new entity:
The various options available for both the firs $ere 4oint 6enture, erger, Ac<uisition, raising
capital through private e<uity etc% Raising +apital through private e<uity $ould only have solved their
probles in short ter% The crucial factor for both the copanies $as to retain their individual
identity% They respected each other's interests in this regard and hence the option of a erger or an
ac<uisition $as never considered $hich led to increase in utual trust bet$een the t$o firs% #or any
strategic alliance to be successful, the distribution of po$er is of utost iportance $hich decides the
control of the fir over the alliance% This issue $as resolved aicably by giving appropriate
representation of both the copanies in the ne$ structure% This has been entioned in detail in the
analysis of the negotiation process ater in this report%
Challenges #or the Alliance:
!erations:
"ne of the proposed areas of synergy $as through rationalization of platfors% This eans
that any shared coponent ust eet the re<uireents of every platfor's vehicles% This
$ould pose a big challenge in designing the vehicle because the vehicles $hich both the
copanies anufactured $ere diverse in nature and $ould ost likely have conflicting
re<uireents%
+apacity utilization of the car anufacturing plants of Nissan $as disastrously lo$% *t $as
operating belo$ even the breakEeven point%
+oping $ith the challenge of copetition fro Toyota in 4apan and also its eroding arket
share in F%,%
Reducing the high anufacturing costs and reEstructuring Nissan's overly diverse product
range resulting fro its attepts to copete $ith Toyota% Also, the design of cars $as
unsuited to the current consuer tastes%
,uccessful introduction of Renault +ars outside Durope leveraging on Nissan's presence in
other countries%
1
%ecommendations:
,ince the Nissan plants $ere running at precariously lo$ levels of capacity utilization it $as
inevitable that fe$ plants $ould have to be shut do$n and the eployees $ould have to be
either laid off or shifted to other plants $ith ne$ $age contracts of lo$er $ages in order to
bring the copany back into profit%
Nissan and Renault can no$ leverage its size to procure ra$ aterials at cheaper rates and
can source it fro places like Asian arkets $here they $ould be lo$Ecost%
Nissan have to restructure their RG1 and design departent in order to produce cars $hich
are in sync $ith the current generation%
(arketing )ersective
*ey issue: (ack of brand a$areness of Renault in 4apan%
Analysis: "n perforing >oint studies JRenault and NissanA, it $as found that though there $as a
strategic link bet$een the t$o copanies and high scope for synergies in any areas% :ut a$areness
of Renault as a brand aong the people in 4apan $as very lo$% 1ue to this, soe of the stakeholders
of Nissan felt that all the cars produced post 46 should be branded as Nissan%
%ecommendation: Marketing and design $ere soe of the strong copetencies Renault had over
Nissan% ,ince both the copanies $ere producing cars targeting different target segents the alliance
$ill not affect Nissan's current arket% 3ost alliance ho$ever, if the cars produced are good in
design, being backed $ith Renault's arketing activities and branded as NissanERenault or vice versa
there is a higher scope of a$areness of the brand and acceptance aongst the people%
Apart fro arketing and design, there $ere any ore areas $here each copany had its o$n
copetencies that $ere copleentary to each other% 3rootion based on these functional
copetencies and ephasizing on $hat this ne$ alliance stands for $ill further aid in brand
a$areness%
*ey issue: No proper distribution structure%
Analysis: Nissan did not have a distribution net$ork% *t heavily relied on its copetitor's distribution
net$ork%
%ecommendation: Nissan had a broad product range for each category that it catered to% *f the
products are not channeled through the right distributor it ight not reach the custoer on tie% This
1
can be one of the potential factors that resulted in Nissan's fluctuating sales Jin ters of volueA
rather than achieving steady gro$th% #or this, Nissan needs to identify strong distribution partners%
This cannot be achieved unless a series of issues like incentives and profit argin for distributors,
distributor involveent in business activities and overall relationship building are addressed%
The above chart represents the changes in sales volue year over year% The drop in sales $as also
attributed to the fact that there $ere fundaental fla$ in the concept and style of the product that $as
produced%
*ey issue: 3ricing strategy of Nissan%
Analysis: Nissan copetencies did not include Kcost reduction' in all its activities% 1ue to this factor
along $ith declining sales, Nissan $as forced to reduce prices in the doestic arket% This resulted
in declined profit argins and $ith reduced sales, led to losses% They also reduced the production in
4apan and increased it in other countries $hich led to union probles%
+inancial Challenges
%enault
#ro -.9/E-.99 Renault suffered fro net incoe losses, follo$ed by positive net incoes fro
-.9.E-..5% Renault is a strong copany that has ade any changes in recent history that helped
the recover fro debts of over 28billion francs Jhalf their annual revenueA and annual losses of
-B%2 billion in -.97% Renault reained profitable until it suffered its first loss since the late 9;'s in
-..5% Renault once again ade changes and the results sho$ed an increase in their earnings before
ta) argin JD:TA fro E/%5H in -..5, to 7%5H in -..9% They also anaged to becoe profitable
again and increase sales fro -97,;89 illion francs to B7/,./7 illion francs% Thus it can be seen
that Renault in spite of facing several probles has coe out ahead on ultiple occasions% This
sho$s other copanies that they have the products and kno$ledge to $ork through and be
successful in difficult ties%
!o$ever Renault's lack of a strong iage in 4apan, its lo$ capital copared to Nissan and its history
as a public sector copany $ith large financial deficits could serve as a>or dra$backs%
,issan
2
Nissans need for a strategic alliance is due to their increasing debts, declining arket share, high
costs of production, and the 4apanese recession% A strategic alliance $ith the right copany could
help the reduce their debt, increase sales, lo$er cost of production, and e)pand their global arket%
Nissan is a top car anufacturer in ters of sales ho$ever their inefficiencies resulted in a lo$
earning before ta) of appro)iately BH JRefer Appendi)A %Their sales are strong but their costs
of production are >ust too high% Nissan can becoe profitable $ith changes ade to reduce the
cost per vehicle% As $ell as having a lo$ D:T, their debt to e<uity ratio has gro$n to an e)treely
high //.H in -..9%
!o$ever, in ters of profitability its perforance $as very poor% *f $e copare the D:T argin
of !onda $ith Nissan, $e $ill find that !onda $ith the siilar nuber of units sold has a uch
healthier D:T argin%
-uman %esources ersective on the ,issan" %enault alliance:
'ransarency and 'rust: The $hole process of alliance $as carried on secretively% *t $as a
one on one affair% This $as to ake sure that there is no dishonesty on both the sides of the
negotiation and the confidentiality of the affairs is aintained% This also eliinated the
insider risk% There $as a relationship of trust bet$een the negotiatorsE Mr% 0oshikazu !avana
and (ouis ,ch$eitzer%
'here was an organi.ational #it seen: Renault $as fle)ible in its approach and $as
courageous to ebrace Nissan's culture $hich $as <uite opposite to that of Renault's% Also
Renault looked at it as a business opportunity%
Did not take advantage o# the Daimler/s $ack out: Renault $as beyond doubt professional
and did not change the deal conditions for Nissan because it $as in a vulnerable position due
1
to 1ailer's $ithdra$al% This $as another reason for the successful forulation of the
RenaultENissan strategic alliance%
Bureaucracy: As entioned in the beginning of the case study that Nissan's organization
culture $as very bureaucratic% *t $as rigid due to $hich no changes $ere possible and the
copany $as suffering financial losses due to this% This $as the ain reason that the alliance
$as designed% *t $ould bring about the necessary changes in Nissan's outlook to$ards
anageent and production processes% Nissan kne$ their $eakness and $anted to $ork on
it%
'he 0aanese Style o# Cororate 1overnance: there $as no decision aker and so Nissan
$as anaged collectively% Therefore there $as lack of accountability%
%ecommendation: There needs to be a structure $here in there is soe responsibility
attached to every place of duty $hich akes it easier to trace the proble in the syste and
helps in value chain analysis%
'he 2nion )ro$lem: The union felt that the doestic capacity $as ignored $hile going for
foreign e)pansion%
%ecommendation: *t is iportant that there is proper counication bet$een the
anageent and the union% The union and eployees should understand the advantages of
the foreign e)pansion% This needs to be conveyed to the by the !uan resource departent
and the anageent so that there is no conflict in the future and the union supports very
ove $ith respect to the foreign e)pansion and alliance%
)roduct and 3uality #ocus: Nissan $as a follo$er of the =eiretsu syste that laid ephasis
on Luality% Nissan had a diverse product range and no established syste of suppliers
therefore their anufacturing costs $ere very high% Dngineering culture took precedence
over anageent culture% 3rootion $as based on length of service%
%ecommendation: There should be a syste that analyses the processes or the value chain
based on cost% The processes have to be cost efficient and ensure <uality standards%
Dncourage eployee to coe up $ith lo$ cost products or process $ithout coproising on
<uality% (ink lo$ cost to incentives% Also perforance based pay needs to be introduced to
otivate eployees to deliver better%
2

E4uality status and articiate in management: Renault did not try to doinate Nissan in
spite of its position as an ac<uirer% Also Renault believed in participating in the anageent
and sent three of its representatives to Nissan's :oard of 1irectors to ake sure that the
alliance $as strategic%
Exchange o# *now how:
The e)change of kno$ ho$ $as the ain ai of Nissan Renault Alliance% They $anted the
kno$ho$ based on $hich they could create a sustainable business instead of thriving on the
financial crutches provided by the partner% This $as facilitated by Renault ore than
1ailerE+hrysler% Thus, it $as a sart ove by Nissan to go for Renault%
%ecommendation: Nissan has to be a bit ore coEoperative $ith its partner% As seen in the
case it $as easy for Nissan to access the kno$ho$ or any inforation related to Renault but
the vice versa $as not true% Nissan has to enhance its counication syste%
1
'he Alliance )rocess:
6arious significant factors need to be considered $hich $ent into shaping the negotiation bet$een
Renault and Nissan% These can be categorized into D)ternal factors J$hich affected both the
copaniesA and *nternal factors J$hich pertain the individual copanyA%
External +actors:
1. As seen fro the D)hibit -/ in the Appendi) in the case study, in -..9 the $orld deand had
been flat for / years and the industry $as being characterized by consolidation of players to
achieve cost reduction and efficient capacity utilization%
Internal +actors:
Renault:
#ailure fro previous negotiations $ith 6olvo $as still fresh in the inds of Renault's
anageent% This put additional pressure on the copany to succeed $ith its negotiations
$ith Nissan to save their credibility and avoid financial losses due to the long negotiation
process%
The #rench ,tate had a 75H stake in Renault and it $as pressurizing (ouis ,ch$eitzer,
+hairan and +D", to coplete a successful negotiation%
Renault $as looked upon by big industry players as a fir ?ripe for takeover@% ,o this could
be the last attept to retain its independent identity%
About 9;H of Renault's sales $ere coing fro Duropean arkets and they $anted to
broaden coverage, gain scale and solidify its arket position%
Nissan:
*t $as aking losses for the 2
th
tie in 5

years, hence an urgent need for cash inflo$%
*t $as losing its copetitiveness to Toyota in its hoe arket and its arket share $as being
eroded in the F%,% too%
2
*t also had the pressing need to retain its independent identity and avoid a hostile takeover
fro the bigger F%,% copanies $ith deep pockets%
'he ,egotiations:
The negotiations lasted fro 4une -..9 to March -...% This . onth period can be divided into five
phases:
*% D)ploring interest in +ollaboration%
**% *dentification of ,ynergies%
***% Dvaluation of possible ,ynergies%
*6% ,triking the 1eal%
6% #inalizing 1etails%
)hase I: D)ploring interest in +ollaboration
*t started $ith (ouis ,ch$eitzer and 0oshikazu !ana$a e)changing letters and a select group of
Renault and Nissan representatives et to e)plore their respective interests in strategic collaboration%
(ater, ,ch$eitzer and !ana$a et in Tokyo and set the $heels in otion for studies on potential
benefits of collaboration%
)hase II: *dentification of ,ynergies
*n this phase $orking groups in and fro both copanies conducted preliinary analyses on
purchasing, engines and gearbo)es, car platfors, production, distribution, and international arkets%
Results $ere found proising as Nissan's capabilities in large cars, research and advanced
technology, factory productivity, and <uality control copleented Renault's talent in ediuEsized
cars, cost anageent, and global strategies for purchasing and product innovation%
1ue to the trust $hich ,ch$eitzer and !ana$a had initially established, they $ent ahead and
strengthened their relationship by holding each other's shares% The t$o +D"s et in 3aris and signed
a eorandu of understanding coitting their copanies to evaluate synergies ore e)tensively
in an e)clusive arrangeent for the ne)t /M onths%
)hase III: Dvaluation of possible ,ynergies JK"peration 3acific' as naed by RenaultA
#ro ,epteber to 1eceber -..9, B- intercopany 4oint ,tudy Teas assebled fro specialists
on each side thoroughly e)ained the copanies' respective operations% The teas held eetings at
1
nearly every one of the copanies' sites $orld$ide, visited plants, and e)changed cost and other
proprietary inforation% #or the first tie, the operational level becae involved in >oint studies%
Top anageent facilitated collaboration $ithin the study teas as needed and a coordinating
coittee revie$ed progress onthly% J+ounication bet$een study teas $as prohibited by
!ana$aI teas reported directly to the chief negotiators%A The ain ob>ective of the study $as to find
areas of potential synergies%
*n idENoveber, ,ch$eitzer, 1ouin and Ghosn presented KThe :ig 3icture' i%e% their vision of the
alliance% The presentation $as so $ellEreceived that the Renault tea deeed it a turning point in the
negotiations%
(ater in the onth, !ana$a paid a courtesy call to 1ailer+hrysler coE+D" ,chrepp in ,tuttgart%
,chrepp proposed to go beyond his interest in Nissan 1iesel and ake an investent in Nissan
Motor itself% !ana$a then fle$ to 3aris to infor ,ch$eitzer personally of his intention to follo$ up
on ,chrepp's offer%
Nissan infored Renault that alliance $ould include both Nissan Motors and Nissan 1iesel% Through
the results of the 4oint ,tudy tea both the copanies agreed that possibilities of integrating $ere in
the processes side and not brand integration as such%
)hase I5: ,triking the 1eal
The fourth phase $as punctuated by developents in the copeting NissanE1ailer+hrysler
negotiations% 1ailer+hrysler $as an e<ual if not a ore attractive partner for Nissan anageent%
1ailer+hrysler had deep pockets to absorb Nissan's deficits and take charge of an industrial
restructuring $hich seeed an arduous task%
Renault aintained the stand for their proposal of /5H stake in the group and BB%2H share in Nissan
1iesel% Renault also reinforced the coitent of their involveent in reEstructuring Nissan's
anageent and their e)perience in that area% According to the industry e)perts 1ailer+hrysler $as
a ore suitable partner for Nissan $hich reinforced ,ch$eitzer's fears that Nissan ight choose
1ailer+hrysler as their favoured partner%
"n March -;, Renault's position copletely changed $hen ,chrepp forally $ithdre$ his bid for
Nissan Motor% The 1ailer+hrysler :oard of 1irectors, leery of Nissan's financial condition and
understated debt at Nissan 1iesel, had pulled hi back%
,ch$eitzer restated the ters of his standing offer% The rationale for not reducing it, even $ith
1ailer+hrysler gone, $as consistency of intent% ,ch$eitzer $as trying to develop a cooperative
relationship, and he did not $ant !ana$a to feel Renault $ould later e)ploit Nissan%
2
These conditions left !ana$a $ith the option of an internally led restructuring based on the Nissan
+orporate 3lanning 1epartent's Global :usiness Refor 3lan and shortEter assistance fro
fello$ ebers of Nissan's industrial group $hich looked a rather $eak option given the scale and
scope of Nissan's needs, this $as a rather $eak option or ove ahead and for an alliance $ith
Renault $hich had the potential of generating huge synergies%
The Renault/Nissan alliance agreeent $as officially signed on B8 March -... giving birth to the
fourth largest autoobile anufacturer $ith .%7H of the international arket% The agreeent aied
at strengthening Nissan's financial position and achieving profitable gro$th for both the copanies%
)hase 5: #inalizing 1etails
The global partnership agreeent signed by ,ch$eitzer and !ana$a on March B8, -... coitted
Renault and Nissan to cooperate to achieve certain types of synergies $hile aintaining their
respective brand identities% The strategic direction of the partnership $ould be set by a Global
Alliance +oittee coEchaired by the Renault and Nissan +D"s and filled out $ith five ore
ebers fro each copany% #inancial ters included an investent of N57/ billion by Renault%
Renault received /5%9H of the e<uity in Nissan Motor and BB%2H of Nissan 1iesel% &ith respect to
anageent, Renault gained responsibility for three positions at Nissan J+hief "perating "fficer,
J+arlos GhosnA, ,trategy J3atrick 3elataA and #inance JThierry MoulonguetA% "ne seat on Renault's
board of directors $as designated for !ana$a% At the alliance level, plans called for the foration of
-- crossEcopany teas to $ork on key areas of synergy Je%g%, vehicle engineering, purchasing,
product planningA and to coordinate arketing and sales efforts in a>or geographic arkets% *n the
autun of -..., +arlos Ghosn subitted the Nissan Revival 3lan JNR3A%
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6essons
1
The RenaultENissan negotiation stands out in any $ays% Autoobile *ndustry e)perts did not e)pect
it to lead to an agreeent let alone an alliance of e)eplary standards%
The RenaultENissan negotiation offers four distinctive lessons:
J-A Go beyond superficial differences; probe parties interests and capabilities for fit. ,ch$eitzer
and his tea focused on Renault and Nissan's coon longEter goals, copleentary interests and
respective capabilities% Their fit on ultiple diensions otivated, directed and sustained the
negotiators% ,oe differences atter less than others and not all differences iply incopatibilityI in
fact, they ay offer substantial benefit%
JBA Prepare extensively, continuously, and jointly as well as internally.
Renault took a broad vie$ of preparation for negotiation% The copany's e)ecutives and staff carried
out thorough internal analyses but also spent onths $orking $ith Nissan personnel even before a
letter of intent $as signed% The >oint preparation before foral negotiations $as ore coprehensive
1 www.weissnegotiation.com
2
and intensive in this case than in any others% The negotiations $ere far fro the <uick, superficial
courtship% *t $as not >ust a handshake bet$een the top anagers%
J/A Consider conceiving a new unusual! for" of relations#ip%
*deas based on a conventional ac<uisition, erger, >oint venture or subsidiaries $ere all set aside%
Renault e)ecutives $ent Ooutside the bo) and conceived a structure by $hich the t$o copanies
could be together but distinct%
J7A $e#ave not only as a negotiator but also as a prospective partner%
Negotiators typically pursue their o$n interests and take their counterparts' into account as needed to
reach an agreeent, $hereas Renault negotiators paid e)tra attention to Nissan's concerns and to life
after an agreeent% They $ere keenly a$are of the copanies' liited history together, the
opportunity that the negotiation offered the to deonstrate their <ualities as a longEter partner, and
the ipact that their negotiation conduct $ould likely have on the ipleentation of an agreeent%
Synergy Analysis (7879:)
%ationale #or an alliance
Renault Nissan
Respective ob>ectives
*proving <uality
*nternationalize
Technology
Reduce +osts
Reduce 1ebt
Global 3latfor
+oon ob>ectives
2
Dconoies of scale
Technological kno$Eho$
(eader for the <uality and attractiveness of products G services
The aking of the alliance $as otivated to$ards developing potential synergies, $here both firs
$ould aintain their operational freedo% The foundation of the alliance focused on the need for the
negotiation of a foral e<uity >oint venture because Renault and Nissan ust evaluate their partners'
e<uities, capabilities and $illingness to cooperate before selecting the right hierarchy% The focus $as
on preserving the identity of the t$o copanies because if you don't respect people's identity, they
$ill not get otivated and you $ill not get a strong corporate perforance%
Renault $as $illing to ipleent a coon platfor, $hich $ould generate significant
econoies in developent costs, industrial e<uipent and purchasing% This strategy has been
fre<uently adopted by autoakers such as 1ailerE+hrysler in the Fnited ,tates or 6olks$agen
and ,koda in Dastern Durope, as a eans of bringing the engineering teas together and of
sharing and developing kno$ledge% #ro an econoic point of vie$, the alliance can be perceived as
a eans of integrating t$o copanies in order to iprove coordination and achieve cost reductions%
#urtherore, even in the case of integrating conflict, stiulating copetition bet$een Renault and
Nissan $ould ensure that they both reduce their costs by benefiting fro econoies of scale,
and thus, increasing their bargaining po$er to$ards suppliers% There $ould be ore ass
purchasing efforts and vehicle platfors as $ell as gro$ing e)change of technologies, but the global
arket strategies of the t$o copanies $ould reain disconnected and independent Jtheir respective
brands $ould be retainedA% Nissan $as part of the =eiretsu in 4apan in $hich diseconoies $ere
creeping in% !ence there $as the need for coplete anageent restructuring for Nissan%
)rinciles that have accomanied the alliance
Three over$heling principles have accopanied the alliance:
To share resources in order to realize econoics of scale,
2
To leverage the copleentary strengths in ters of products, arkets and kno$Eho$ in order
to iprove efficiency and
To preserve the separate brand identities in order to aintain a strong brand iage and appeal
to a broader custoer base%
These principles $ill allo$ the t$o copanies $ith siilar size, but contrasting corporate cultures to
pursue a coon strategy of profitable gro$th%
1eograhical Distri$ution o# their resective markets:
Renault Nissan
&estern Durope --H /%-;H
North Aerica 7H
,outh Aerica 2%-;H
4apan -2%/;H
A,DAN -;%9;H
Middle Dast 8%.;H .%-;H
,ince the t$o copanies sho$ed strength in different regions of the $orld their collaboration $ould
ensure increased geographical coverage% Renault $ould no$ be able to foray into North Aerica,
4apan G A,DAN countries $hereas Nissan can increase its presence in Durope and ,outh Aerica%
Comlementarities o# their roduct lines and the ossi$ility o# sharing common lat#orms
Model +ategory Renault Nissan
Dntry level
7P7
3ickEup
Renault $as better at aking saller cars $hile Nissan $as better at aking larger cars% 1espite the
fact that both the copanies $ere not in direct copetition $ith each other there $as a strong
potential for platfor integration thus indicating a possibility of reduced costs and increased
efficiency%
Renault Nissan Alliance
1
Nuber of 3latfors 9 B5 -;
6olue per platfor J;;; unitsA B9; -;2 2;;
Strategic Alliance
The size of the t$o copanies in ters of arket capitalization, vehicle production and nuber of
units produced $as very siilar as of -..9 thus lessening threats of future doinance or possible take
over fro either side%
Renault Nissan
&orld arket share 7%.;H 7%/;H
6ehicle production Jin illionsA B%5 B%-
1
A))E,DI;
Nissan #inancial 3erforance J:illion 0enA
-..B -../ -..7 -..2 -..5 -..8 -..9
,ales 57-8 5-.8 29;; 29/7 5;/. 5529 5257
"perating profit -27 E27 E-7B E-;B 7/ -.. 97
Net incoe -;- E22 E95 E-55 E99 88 E-7
,ales J ;;; unitsA B9-/ B5.- B8;; B58- B8-; B259
Total long ter debt B;72 B//- B59; BB;. /8B9 /9/. 7/7B
Total ,hareholderQs
D<uity
-29; -7B. -7B. -/25 -/25 -B9B
"perating profit argin BH E-H EBH EBH -H /H -H
Net profit argin BH E-H E-H E/H E-H -H ;H
1ebt / D<uity Ratio -79H -99H -22H B82H B9/H //.H
1ebt / ,ales Ratio /BH /9H 75H /9H 5BH 29H 55H
1