TOKYO -- Renault, Nissan and Mitsubishi said they would revive their struggling alliance by dividing markets and technologies in a bid to achieve a smaller, but more sustainable, global business that will re-emerge as "the most powerful combination of companies in the world."
Under the new strategy, which was unveiled on Wednesday, alliance executives said they will create further efficiencies by extending commonization of vehicle platforms to upper bodies. They will also select a "mother vehicle" that will serve a template for every other model in the segment.
Across the three automakers, the plan will reduce the number of vehicle platforms in half to four commonized architectures, in a move that will save 40 percent on product development.
About half of all alliance models will be developed and produced under this approach by 2025.
The plan was delivered at a joint online press conference from Tokyo and Paris by the leaders of the alliance -- Alliance Operating Board Chairman Jean-Dominique Senard, Nissan CEO Makoto Uchida, Mitsubishi Chairman Osamu Masuko and Renault acting CEO Clotilde Delbos.
"In a few years' time, given what we're doing now, this alliance is going to be the most powerful combination of companies in the world," said Senard, who is also Renault's chairman. "This step today is absolutely essential."
Smaller goals
Unlike alliance midterm plans of the past under former Chairman Carlos Ghosn, the new strategy does not have big numerical targets. It keeps to conceptual goals. The assembled leaders also repudiated the alliance's old goals of volume for a redoubled focus on profits.
"The previous strategy was focused on growth and volume as much as possible on differentiation among the brands," Alliance General Secretary Hadi Zablit said. "What we have done so far is to refocus on competitiveness and profitability."
In many ways, the new plan simply builds on the commonization pursued by the alliance for years under its push to develop and roll out a common modular family, or CMF, platform for different segments. Last year, for instance, common platforms underpinned 39 percent of all vehicles produced by the alliance. The number will double by 2024, Senard said.
Senard said the joint platform plan’s latest iteration takes synergies to the next level by integrating the top of the car, as well as the architecture underneath. Platforms account for only one-third of vehicle investment. By folding in upper bodies, the alliance partners will be able to jointly shoulder the development costs of parts accounting for two-thirds.
“To see real impact on competitiveness, we need to push our standardization further, from platform to upper bodies,” Senard said. “The additional potential savings are tremendous.”
He estimated the companies could save 2 billion euros ($2.20 billion) on developing the next-generation of C-segment crossovers by using this strategy.
The announcement was the start of a three-day rollout of midterm business plans. The alliance top executives spelled out the bird's eye view on Wednesday. Nissan will follow on Thursday with its fiscal full year earnings and a deeper dive into its own plans. Renault rounds out the week on Friday, delivering specifics of its own plan to cut costs by 2 billion euros ($2.20 billion).
Together, the three companies -- held together through cross shareholdings -- are expected to plot a road to recovery that involves plant closures, layoffs and billions of dollars in cost cutting.
The alliance announcement on Wednesday did not mention job cuts, factory shutdowns and cost cutting targets. Those are expected to be outlined later by each company.
No merger
Senard also demurred from discussing possible merger plans or a rebalancing of cross shareholdings, two perennial hot topics of speculation in recent years.
"The answer is easy, there is no plan for merger of companies," Senard said when asked about the issues. “So, I think it has to be very clear. Our model today is a very distinctive model. And as you can see from all what we have said, we don’t need a merger to be efficient.”
Senard said the alliance is still open to partnering with outside companies. But the first priority, he said, was getting its own house in order through better efficiency and profitability.
Key to plan is a new approach called the "leader-follower strategy."
Under the new push, Renault, Nissan and Mitsubishi will divide up the world into spheres of influence where one company leads, to avoid duplication, save resources and achieve better product focus.
The different markets will be called "reference regions" where the leader company serves as a model for the most competitive practices. Nissan will take the lead in North American, China and Japan, the world’s top three auto markets. Renault will spearhead Europe, Russia, South America and Africa. Mitsubishi will head-up Southeast Asia and Oceania.
Future technologies
They also will divide responsibility for development of future technologies.
Nissan will be a leader in some areas of electrification for larger vehicles and autonomous driving, as well as connectivity for China.
Renault will assume the lead for Android-based connectivity, as well as electrification for small vehicles and overall electronic architecture. Mitsubishi is expected to focus on plug-in hybrid technology.
Nissan will also take responsibility for developing the critical C- (compact) segment crossover platform for all alliance vehicles worldwide from 2025. Renault will lead B- (subcompact) segment crossovers for Europe.
Senard estimated that the companies can boost the efficiency of developing some of the shared technologies by 20 percent by avoiding duplication.
As an example of the changes in store, Senard outlined the pending plan for small cars in Brazil. Currently Renault and Nissan use four platform variants to develop six models for that market. In the future, there will be seven models derived from only one redesigned platform.
The plan is also expected to scale back bold ambitions for global growth pushed by former boss Ghosn. After Mitsubishi joined the alliance in 2016, the auto empire became world's top seller of light vehicles in 2017, with volume of 10.61 million units.
But volume has fallen off since then, leaving the automakers with an overhang of capacity. Reeling in that unused factory firepower will be a top priority for them under the plan.
“The Alliance new model focuses on efficiency and competitiveness, rather than on volumes," Senard said. “For our three companies, the alliance is the keystone to our resilience."
Plunging earnings
The reset comes amid plunging earnings and sales at the three automakers, following Ghosn's stunning 2018 arrest.
Mitsubishi just reported a net loss for the fiscal year ended March 31, and Nissan has warned it will do the same this week. Nissan's loss will be its first in 11 years.
Meanwhile Renault, which France's finance minister said could "disappear" without government aid, had its corporate bond rating slashed to junk status by Moody's in February.
The three automakers were hurting before the COVID-19 pandemic hammered the global economy. But the ensuing shock of plunging demand, closed dealerships, suspended factories and disrupted supply chains piled new stress on top of their fragile balance sheets.
In fact, looming uncertainty about the ongoing pandemic weighs heavily on the midterm plans. Even as Renault, Nissan and Mitsubishi settle on new targets for the coming years, they do so knowing a second wave of COVID-19 shutdowns could throw even the best-laid plans off course.
"How the market will evolve is very difficult to assess," said one person with knowledge of the strategy. "The question is, what will happen in the transition? And that requires a lot of care."
