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International Business: Autos
Who Says Renault-Nissan Is Iffy Now?
The carmaker's unlikely pairing is paying off in spades
Who would have guessed two years ago that DaimlerChrysler, the global car industry's dream team, would now be dogging it? Or that Renault and Nissan Motor Co., a dicey-looking duo when they teamed up last year, would look dynamic?
But here we are. On Sept. 27, DaimlerChrysler confirmed that Chrysler will report a third-quarter operating loss of $528 million. Next day, Carlos Ghosn, Nissan Motor's Renault-bred chief, prompted a 18% rally in Nissan's stock when he announced in Paris that his overhaul of the ailing Japanese auto maker was ahead of schedule. "The bottom line," says Noriaki Hirakata, a top auto analyst at Morgan Stanley Dean Witter in Tokyo, "is that Ghosn is delivering what he promised."
No arguing that. Since embarking on his radical restructuring last October, Ghosn has easily earned his nickname, "Le Cost Killer." Three of the five assembly plants he plans to shutter by 2002 will be gone next March, and he's on track to take 21,000 names off Nissan's payroll. Procurement costs are coming down, U.S. sales are rising, and Ghosn already has begun to make Nissan work for its new parent. Analysts now say operating income for the year ending Mar. 31 could be as much as 80% higher than the $1 billion Nissan originally forecast. "Nissan's either on track or ahead of schedule at every level," says Gaetan Toulemonde, a Paris-based analyst with Deutsche Bank.
It's the news Louis Schweitzer, Renault's chairman, has been waiting for. The soft-spoken Schweitzer bet the farm when he put $5.4 billion into a 37% holding in debt-wracked, floundering Nissan. If the deal worked, Renault would be a global player; if it failed, both companies would be vulnerable. Schweitzer and Ghosn have yet to win the bet, but they're cautiously optimistic. "It's working fairly well," Schweitzer says.
Now it's time to make the partnership hum. Renault is adopting Nissan's factory-management techniques. Nissan is learning to promote talent and make decisions quickly. And both companies are spending millions of dollars to teach French and Japanese managers English so that they can communicate. "We're establishing common goals," Schweitzer says. "And we're looking for a good balance between Japanese bottom-up and French top-down management techniques."SPEEDING UP. It won't come easily. Nissan's sales in its depressed home market were off 8% in the half year to Sept. 30. That has been partly offset by a 15% gain in the U.S. market in the first nine months of the year, thanks to hits such as the Xterra SUV and the Frontier Crew Cab pickup. But if Japan fails to recover or the U.S. turns down, it could thwart Nissan's ambitious product rollout. Nissan is launching 22 new models worldwide over the next three years. It's planning 10 new models for the U.S. market, including a new Z sports car. Renault, too, is rolling out a series of products. But analysts worry that its model range will still be older than the European average.
For both Renault and Nissan, the solution is speeding up model rollouts by using common platforms--the core framework of cars that includes the floorpan, drivetrain, and axles. Both manufacturers expect this technique to lower production and purchasing costs. Overall, Renault and Nissan will reduce the number of platforms to 10 from 34. It's another contrast with DaimlerChrysler. While the German-U.S. giant won't share platforms for fear of tainting the Mercedes brand, platform sharing is the raison d'etre of the Renault-Nissan alliance.
The market likes what it sees. As Nissan prepares to release its first-half report at the end of October, parent Renault's shares are rising: They've climbed 29% since March, to $43.50 on Oct. 11. Shares in DaimlerChrysler, meanwhile, have plunged 31% for the same period. Investors, it seems, are placing their bets, too.By Christine Tierney, with Anna Bawden, in Paris and Irene M. Kunii in TokyoReturn to top