BRUCE GAIN

Renault to gain most from closer ties with Nissan

Bruce Gain is an Automotive News Europe correspondent in France.Bruce Gain is an Automotive News Europe correspondent in France.
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Renault stands to benefit the most from deeper integration with alliance partner Nissan, industry watchers believe.

Renault likely will reap 45 percent of the estimated 4.3 billion euros ($6 billion) in synergies the alliance aims to achieve by 2016, Deutsche Bank analyst Gaetan Toulemonde said.

Renault’s 45 percent share is more significant since Nissan's revenues are about twice that of Renault's. "Out of the 4.3 billion euro synergies, 40 percent are profit-and-loss synergies," Toulemonde said. "When I look at Renault’s annual volumes of 2.5 million units versus Nissan’s annual volumes of 5 million units, then 45 percent of those synergies are thus much more significant for Renault."

Renault needs the cost savings of the synergies to meet its operating margin goal of 5 percent by 2016 compared to 3 percent in 2013, French newspaper Le Figaro reported.

"Renault still has the biggest road to cover compared to Nissan in terms of volumes, profitability, and efficiency," said Carlos Da Silva, an analyst for IHS Automotive. "Consequently, the leverage effect of anything that could improve such items might indeed be more favorable to Renault than Nissan."

Nissan’s role in the alliance continues to grow in importance but Le Figaro noted that Carlos Ghosn, CEO of both automakers, avoided upsetting the French government and unions by shifting Nissan production to France as Renault shifts more production out of its home country to lower-cost locations. Renault’s annual production of 130,000 units of the Nissan Micra in its plant in Flins, near Paris, should be more than annual production in the factory of the Clio subcompact car and Zoe EV combined, Le Figaro said.

On Monday, Renault and Nissan detailed the deepest integration moves yet in their 15 year-old alliance by combining key operations under a new team of managers to accelerate integration between the two carmakers. Japanese executives from Nissan will take core new engineering and manufacturing leadership roles while Renault executives will head purchasing and human resources for the alliance.

You can reach Bruce Gain at bgain@crain.com.

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