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Renault and Nissan really need help. The alliance that Carlos Ghosn built could be their only hope
Already under great pressure from the decline in sales and profits in 2019, the fall in global car demand this year could push French and Japanese companies closer together to cut costs and share the burden of building a new generation of electric vehicles.
The automakers have been partners since 1999, working together on strategy and product development while never taking risks and completing a full merger. Together with Mitsubishi Motors’ junior partners, the unique industry alliance employs around 450,000 people and in 2018 sells around one in every nine cars worldwide.
Renault participated in merger talks with European rivals, and there are big questions about how the alliance will revive its wealth in North America, where Nissan is an important player but its French counterpart is not. Analysts also ask questions about cultural differences in the company.
The companies so far have largely maintained separate manufacturing facilities. Sharing production at the Sunderland factory can be a sign that car makers have put aside their differences and responded to the crisis by helping each other reduce costs.
According to Nikkei, Renault and Nissan are looking for joint production facilities elsewhere in Europe, as well as South America and Southeast Asia. Nissan, for example, can start producing Renault vehicles at its plant in Brazil. The companies also reportedly hope to increase the number of parts that can be shared between their cars and accelerate plans to develop a shared vehicle platform.
Spokespersons for Nissan and Renault declined to comment on Monday.
Renault and Nissan are already struggling
Renault was in trouble before the pandemic struck. The French carmaker reported the worst financial performance in a decade last year, with net profit down 99% to only € 19 million ($ 21 million). Its share price has fallen 69% since the start of 2019.
In April, the company’s global sales fell by almost 70% compared to the same month last year when a pandemic hit Europe and North America. The company stopped production at 12 facilities in France in mid-March, continuing operations in most factories only this month.
French Finance Minister Bruno Le Maire warned Friday that Renault is in “serious financial trouble.” “Renault could disappear,” he told Europe 1 radio.
The French government owns 15% of Renault, and is currently negotiating a € 5 billion ($ 5.4 billion) loan requirement for the company, which has not been approved by Le Maire. The Finance Minister said last week that Renault should not close its factory north of Paris – one of the few facilities currently producing cars for Nissan.
“We signed when we found out what Renault’s strategy was,” Le Maire told the radio station. The company’s plan must include the transition to more environmentally friendly vehicles. “We want Renault to be more productive and produce more vehicles, especially electricity, in France,” he added.
Nissan, which reports financial results for the 2019 fiscal year on Thursday, has experienced four consecutive quarters of decline. Operating profit fell to 54.3 billion yen ($ 504 million) for the three months ended December, down 83% from the same quarter a year earlier.
– Hanna Ziady contributed reporting.
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