After coronavirus and Ghosn: Renault and Nissan plot their future

When Nissan and Renault set out to make their first mass-market electric car a decade ago, early ambitions of collaboration drained away amid infighting between the groups. The resulting Nissan Leaf and Renault Zoe shared only a single common part.

“No street artist in Paris will ever say the ‘Mona Lisa’ is better than his own painting,” Ashwani Gupta, Nissan’s chief operating officer, told the Financial Times over video link this week. “It is the same with engineers: no engineer will say that the other engineer is better than me.”

Now as the carmakers announce their latest attempt to reboot their fractured alliance and weather the economic storm, past efforts at close co-operation are being unwound.

A new “leader-follower” system puts one group in charge of the production of particular models and regions in an attempt to play to each company’s strengths.

Jean-Dominique Senard, Renault’s chairman, agrees that the previous attempts to divide work between the businesses led to “a tremendous amount of mess in terms of going back and forth in meetings and all the rest where they decide nothing”.

He added: “It has paralysed the company.”

In the broader restructuring, Nissan and Renault are to scale back models, close factories and lay off workers. They are attempting to cut $5bn in fixed costs and plan to shed at least 27,500 jobs in the coming years. Both companies are looking at cutting back production capacity by about 20 per cent to a combined 8.7m vehicles a year by 2024.

Spanish factory workers protesting against the closure of Nissan’s Barcelona plant

Spanish factory workers protesting against the closure of Nissan’s Barcelona plant © Getty Images

The alliance has also attempted to slay the ghost of Carlos Ghosn, who led the group that also includes Mitsubishi, for two decades with a vision of building an untouchable global behemoth.

If it works, the alliance, which was once the car industry’s largest, will come through the current crisis intact. If not, a split seems all but inevitable, forcing them to find new partners — or acquirers.

“This is the last roll of the dice,” said one person close to alliance management. “They have tried every option. If this doesn’t work, the three member companies just won’t survive on their own.”

While the businesses were struggling before the global pandemic took hold, Covid-19 has stripped away any pretence that the companies can survive alone in an industry where the largest participants are still bulking up.

Chart showing share prices of Nissan and Renault

The full merger long envisioned by Mr Ghosn is off the table. His audacious sales targets and an obsession with “being first on the podium, irrespective of whether customers were willing to pay” to make the sales profitable have been ditched, Clotilde Delbos, Renault’s interim chief executive, told investors.

“Now we have faced reality, we do not want to be on top of the world. What we want is to have a sustainable, profitable company,” she said. “It’s a complete change of goals.”

Alliance leaders carved out the strategy in less than six months, flying between Paris and Yokohama once a month before switching to weekly Zoom video calls when global travel became impossible.

“Look, we’ve been here before and we could be here again, wondering if it’s the last chance for the alliance. But this is serious, we know we have to become profitable,” said a board member at one of the companies.

But people inside both businesses say significant hurdles remain, not least governments in both France and Japan — and question whether the new approach is a clean break from the past or merely the latest effort to paper over the cracks.

For the two companies struggling to stem the cash drain caused by the global halt to car sales, executives say the new framework is the “best available option” for the alliance to slash fixed costs of plants and other investments in underperforming markets.

How Renault is hoping to save €2.15bn

While the leader-follower model essentially means Nissan’s retreat from Europe and Renault’s retreat from Asia, the strategy saves both companies the painful and costly process of negotiating a complete exit from the regions with dealers and government officials. 

“The main objective is to avoid duplication of investment. But there is no magic solution beyond that,” said one person close to Nissan’s management. “This does not ensure that the alliance will develop and grow from here.” 

Beyond the cost-cutting exercise, the strategy requires a fundamental change in mindset for employees used to how things were done during the Ghosn era. The new regime will also part with a pay-oriented culture where employees were rewarded for hitting financial targets. “That involves pain and it takes time,” said a senior official inside the alliance. 

Mr Gupta said: “You have to change their mindset from volume to value. This change of mindset around the world, including our dealers, is really important.”

How Nissan is hoping to save $2.8bn

Mr Senard also sought to draw a line under the target-based culture of the Ghosn-era: “I’m fed up with these false targets and synergies that dance around in the air in a show where at the end of the day nobody understands where they are. And they end up nowhere because the process is not the right one.”

Representatives for Mr Ghosn defended his performance and management of the alliance, saying he could not “be responsible for the state of the company that he hasn’t run for 18 months”.

The strategy overhaul also comes at a period of leadership change at both Nissan and Renault. The French carmaker’s incoming chief executive Luca de Meo has yet to start after leaving Volkswagen, while Nissan is still experimenting with a troika management team led by chief executive Makoto Uchida.

Amid the boardroom shake-up, people close to Nissan said both Mr Uchida and Mr Senard have yet to develop a solid relationship with the top management of its third partner, Mitsubishi Motors, the only member not to announce a new midterm plan last week. 

Within the alliance, there remain doubts whether the interests of the three partners are aligned. “It’s all done with an eye to what’s best for Nissan and none of it has to do with what’s best for the alliance,” said one person close to the Japanese group. 

Hard choices lie ahead, fraught with political considerations as well as business rationale. Talks are continuing over the transfer of dealer networks and other services as the alliance divides itself by region.

The French state, which is Renault’s largest shareholder and is close to signing a €5bn loan guarantee for the carmaker, is also trying to walk a line between allowing the group to cut costs and keeping unions and the public on side. At Renault’s Maubeuge factory in the north of the country, protesters accusing Mr Senard of treachery marched on Saturday against the planned job reductions, of which 4,600 are to be in France.

Elsewhere, discussions between the pair to build two Renault models in Nissan’s UK Sunderland site, reported in the FT last month, were temporarily halted as it became clear it was not feasible to push ahead in the political climate, according to two people.

The two sides, who fundamentally agree on the industrial logic of the move, intend to restart discussions “within weeks”, one of the people said. The other said it was too early to put any timeline on the talks beginning again.

But both companies now say the hard choices have to be made — this crisis is too deep to allow the luxury of internecine warfare.

“There is no way back,” said Mr Senard. “There is no return because we can’t afford it.”