The Renault-Nissan Alliance has undoubtedly been an automotive industry success story. In its fifteen years of existence, the alliance of the two has brought big benefits for both participants in terms of components procurement, scale economies and shared engineering costs.
The companies have just announced that they are going to take their integration up a gear. The functions being brought closer together are research and development, manufacturing and logistics, purchasing, and human resources which will be jointly managed in future.
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Purchasing has been combined significantly for more than a decade but additional convergence projects in R&D and manufacturing will be designed to drive more synergies and economies of scale for the companies.
Carlos Ghosn’s vision for the auto industry’s evolution is similar to that of Fiat-Chrysler’s Sergio Marchionne. Both believe that the automotive industry will become dominated by the big groups able to exploit scale economies on global platforms and engineering structures. These large groups will enjoy a competitive advantage over the rest and their ability to reinvest in R&D and new product will create a relentless positive feedback loop. A key difference, though, is that Marchionne wants full merger between Fiat and Chrysler; for Ghosn, Renault and Nissan stay separate.
In Carlos Ghosn’s vision, the scale economies ahead become aligned with major technological drivers in the shape of greater electrification and autonomous control. Being ahead in those fields is essential, he believes. Pure electric cars have got off to a slow start, but EV sales are set to rise as the technologies improve and costs come down. The autonomous car is starting to sound less science fiction now that we have cars on the market that are capable of driving themselves in certain situations.
Questions are, however, bound to be asked about how Renault-Nissan’s alliance will evolve further. It has always been presented as the best of all worlds: two companies working well together, but maintaining their independence. No need for full merger, was always the line. But at what point has integration between two separate companies reached its limit, in terms of cost savings? There again, you can imagine some of the politics that would come into play with a full-on capacity and resource rationalisation exercise if Renault-Nissan became one company. That grief is avoided while they are separate entities, though the suspicion has to be that there are greater cost savings to be had.
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By GlobalDataThere is also the question of Carlos Ghosn’s succession. He’s still only 59, so maybe he’s not in a hurry to depart (just ask Carlos Tavares). The question will be increasingly asked though. It’s a tricky one and one suggestion has been that there is no need for a single head of both companies, that Ghosn’s position was a one-off and two CEOs could work together without the need for a single unifying figure. The latest round of integration measures are perhaps designed to get the two companies bound more closely together and prevent any negative internal alliance politics as the prospect of Carlos Ghosn’s departure comes increasingly into view.
It’s tempting to say, in business and the world of work, that no-one is really irreplaceable. Big personalities in big jobs come and go. The world still spins on its axis. Carlos Ghosn, however, in his unique position as the creator of the Renault-Nissan Alliance is probably about as close to being irreplaceable in his current role as anyone can be.
See also: FRANCE: Renault-Nissan alliance brings functions closer together
