Renault-Nissan: The Paradoxical Alliance

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Table of Contents

Key Reasons Behind Nissan’s Performance
Alliance
Unanimous Pessimism
Carlos Ghosn’s Key Challenges
Ghosn’s Actions
Success and Position Nowadays
Lessons

Key Reasons Behind Nissan’s Performance

The key reasons are regarded to be the difficult financial situation in the 1999, when Nissan nearly became a bankrupt. It is explained by the fact that the two largest car markets (the USA and Japan) were featured by the decreased sales of the cars during this period. Thus, the production of Nissan declined to 600,000 units (nearly 53%).

Alliance

On the one hand, it is necessary to mention that the alliance is senseless, as Renault Company has already had negative experience n merging with Volvo. It is claimed, that car companies’ unification during their crisis periods is not the best solution of the problem. On the other hand it is emphasized that the merging companies were quite matching in geographic scope and skills. Renault had a flair for marketing and design, and was strong in Europe and Latin America. Nissan was an engineering powerhouse with a strong market presence in Japan, North America and Asia.

Unanimous Pessimism

The news of the unification were met without enthusiasm because of the fact that these two corporations experienced not very successful times in their histories, and they were regarded as two mules on the horserace, as the industrial powers and financial capabilities of these companies were not rather strong.

The key success factors in management literature are based on the concept that a corporation’s information structure should be highly selective, concentrating on the most successful factors of the activity, and actions which are vital for the company. These factors must be closely linked with the aims of the organization and shape the grounding of management control.

The personal experience states, that key success factors are linked with a few key spheres of activity in which positive results are necessary for successful competitive performance for the company.

Renault and Nissan stand against these factors by just ignoring the significance of the information system and focusing on the success factors.

The risks, which companies faced, were linked with the instability of their position on the markets and the instability of the markets themselves. Thus, the future of the alliance was shady and lacking any perspective.

Carlos Ghosn’s Key Challenges

Return to profitability during the year March 2000 to March 2001. The net income after tax of the Nissan Group will be positive.
An [annual] operating margin superior to 4.5 percent of sales during the year March 2002 to March 2003.
A 50 percent decrease in net debt, from $12.6 billion today to $6.3 billion by March 2003.
Reduce purchasing costs by 20 percent by March 2003.
Reduce 21,000 jobs (from 148.000 to 127,000) by March 2003.

Ghosn’s Actions

First of all he established the cross-functional teams for the corporation, Each one was led by two Executive Committee members and headed by a pilot. Team members were selected by the leaders and the pilot from the company’s managerial ranks. This was performed for the changes in the managerial structure, which was ineffective for that time.

As for the personnel, he had selected the people who clearly realized the goal of the company, and who were able to act like F1 pilots, who use acceleration and breaks in time, when it is most needed. The profiles of the managers looked exactly this way, as they were reaching the same goal.

The plan was implemented with the help of cross-functional teams. They appeared to be successful as they were planned to perform not only direct responsibilities, but also be able to replace other teams. Thus, all the responsibilities were assigned, and teams were interchangeable.

Ghosn’s approach may be described as multi-angle and global, as he was not afraid to subject almost bankrupted company to global and deep changes.

Success and Position Nowadays

The only thing may be said of this alliance. The production by these companies is rather popular on the European and Asian car markets. The companies are close to their industrial maximum and can afford comfortable conditions of purchase for their clients.

Lessons

These are the following:

There is no need to be afraid of changes
Closeness to bankruptcy is not the bankruptcy, and wisely elaborated strategy may become the way out
The highest goal should be set independently on the capabilities

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