Renault-Nissan cost cuts ahead of schedule

8 years ago - 11 July 2016, Automotive News
Renault-Nissan cost cuts ahead of schedule
Carlos Ghosn's Renault-Nissan Alliance is running a year ahead of schedule on its mission to capture operating cost savings at the two automakers.

Ghosn's goal has been to reduce the two companies' costs by 5.5 billion euros, or about $6.1 billion at current exchange rates, by fiscal 2018.

Arnaud Deboeuf, senior vice president of the alliance, says the partners achieved joint savings of 4.3 billion euros ($4.77 billion at current rates) in fiscal 2015, a year ahead of the timeline set by Ghosn, CEO of Renault and Nissan.

Joint purchasing delivered one third of last year's savings.

Shared engineering contributed about 26 percent, and shared manufacturing costs chipped in about 17 percent of the reductions. 

Engineering and manufacturing costs were reduced in part by the introduction of a new modular vehicle platform, the Common Module Family, that increasingly underpins new vehicles at Nissan and Renault. 

"With engineering, we try to avoid double development," Deboeuf said last week in a briefing at Nissan's global headquarters. 

He cited autonomous driving technology as one area in which the companies are pooling resources. By 2020, Renault and Nissan plan to introduce 10 models with autonomous-driving technologies. 

By the same year, the Alliance wants 70 percent of its vehicles to be built on the Common Module Family architectures. The Nissan Rogue and Qashqai crossovers, for example, share their C-D-segment platform with Renault vehicles. Last year, the two automakers introduced a shared platform for small cars from Datsun and Renault.

Spread the effort

Some vehicles now share more than 65 percent of their parts, Deboeuf said. But the key is sharing unseen components, so each brand maintains its identity.

Ghosn has made the quest for joint savings through shared work in engineering, purchasing, production and back-office operations a driving force to boost profitability at both automakers.

Key to the push has been widening the alliance to include other partners, including Germany's Daimler AG and AvtoVAZ, Russia's largest carmaker.

The group now aims to include Mitsubishi Motors Corp. by year end, following Nissan's proposal in May to buy a controlling 34 percent stake in Mitsubishi for about $2.2 billion.

Deboeuf says that partnering with Mitsubishi will generate additional savings that push the Alliance beyond its 5.5 billion euros cost-savings goal.

Nissan is doing due diligence on the acquisition.

"The target will increase," Deboeuf said. "The main purpose of this work is to find additional synergies between Nissan and Mitsubishi. After, we will look at global synergies for the Alliance." 

Where to build

The fiscal 2018 cost-savings target includes a plan for 80 percent localized production. That footprint may be adjusted, depending on the outcome of Britain's vote to withdraw from the European Union, a political change that may have implications for where future models are built.

But the Alliance has no immediate plans to move production out of Britain because of trade concerns, Deboeuf said.

The Alliance, which has a Nissan factory in Britain and Nissan and Renault factories in mainland Europe, is still assessing last month's Brexit vote by the U.K.

A decision to manufacture a nameplate in any factory, including Nissan's plant in Sunderland, England, is a long-term investment of six to seven years, he noted.

"When it comes to shifting production, it's very difficult," Deboeuf said. "The position in Sunderland is fixed. Now the question would be for the future production."

Sharing the load

3 sources accounted for three-fourths of the $4.77 billion in cost reductions achieved by the Renault-Nissan Alliance for the 2015 fiscal year.
  1. Joint purchasing: 33%
  2. Shared engineering: 26%
  3. Shared manufacturing: 17%