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Renault-Nissan-Mitsubishi now targets profitability rather than volumes

1st December 2020
"Renault-Nissan-Mitsubishi now targets profitability rather than volumes"

A report in AFP states that car manufacturers Renault, Nissan and Mitsubishi Motors announced Wednesday that they are now targeting profitability as a priority and ending the race for volumes, breaking with the strategy of the ousted former boss Carlos Ghosn.

"The alliance is the keystone of our resilience (...). Today, (it) is refocusing on efficiency and competitiveness rather than volumes," said the president of the Franco-Japanese partnership. , Jean-Dominique Senard, at a press conference.

Since the arrest of Mr. Ghosn in Japan in November 2018 for alleged embezzlement, this unique alliance in the automotive industry has experienced a descent into hell, after having reached the first world place in car sales by selling more than 10.6 million units.

These record volumes, which were the pride of Mr. Ghosn now a refugee in Lebanon, will not have been of much help for the three partners in crisis. Their profitability had sunk even before the start of the Covid-19 pandemic.

"In recent years we have focused too much on the expansion strategy that has caused a massive increase in fixed costs," said Osamu Masuko, boss of Mitsubishi Motors, referring to the overcapacity of the factories of the alliance.

The new strategy presented on Wednesday plans to jointly develop and produce "almost 50%" of the three manufacturers' models by 2025. It strengthens the ties of partners bound to come together to get out of the crisis.

This pooling "should make it possible to reduce costs and investment expenditure by model up to 40% for vehicles designed under this new scheme".

These announcements come at a time when Nissan and Renault are due to unveil severe savings plans on Thursday and Friday, respectively, including site closings and job cuts.

They were very well received on the Paris Stock Exchange, where the Renault share soared 15% around 12 noon.

The plan evokes a "leader-follower" scheme, with a referent company by model, by geographical area and by technology, the two other partners benefiting from the know-how and industrial capacities of the leader.

The objective is to strengthen "standardization (...), from the platform to the complete vehicle". The production of jointly designed vehicles will be grouped together in a single plant "when (it) is deemed relevant".

For example, the renewal of mid-size SUVs (urban 4x4s) (Renault Kadjar, Nissan Qashqai) will be led by Nissan, and that of small SUVs (Renault Captur, Nissan Juke) by Renault.

Regarding the geographic distribution, Nissan will become the benchmark in China, North America and Japan. Renault will be for Europe, Russia, South America and North Africa. Mitsubishi Motors will be the leader for the countries of Southeast Asia and Oceania.

In terms of technology, Nissan will take orders for autonomous driving and for the engines of future electric models developed on dedicated platforms.

Renault will be responsible for connectivity technologies (except in China where it will be Nissan) and for the electrical-electronic architecture of vehicles. The diamond group will also be responsible for the powertrains of electric vehicles derived from thermal platforms.

Finally, Mitsubishi will be the benchmark in plug-in hybrid technologies (gasoline-electric) for medium and large vehicles.

The French newspaper Le Figaro claims that Renault plans to cut more than 10% of its French workforce by 2024. Nissan could cut 15% of its jobs worldwide by 2023.

Renault unveiled its first losses in ten years at the start of the year and was forced to apply for a state-guaranteed loan of 5 billion euros. Nissan will announce Thursday expected results also in red. Mitsubishi is to announce an economic plan in late July or early August.

The renewal of leaders at Renault and Nissan, driven by Mr. Senard, seems in any case to have turned the page on a year of crisis between French and Japanese in the wake of the Ghosn affair.

But the partnership, which is based on cross-shareholdings (Renault owns 43% of Nissan, which itself owns 15% of the diamond group and 34% of Mistubishi), is not intended to be transformed into an integrated group like Volkswagen or Toyota. "We have no plans for a merger (...) or need for a merger to be effective," said Senard.

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Compiled by : Debashish S Neupane Debashish S Neupane