Things keep getting worse for the alliance of automakers Nissan, Renault, and Mitsubishi. Though never actually merged as a single company, the alliance started in 1999. It was meant to capitalize on economies of scale. When the alliance architect and head Carlos Ghosn was arrested in Japan in 2018 things went downhill quickly. Since then it has been one bad quarter after the next. Last week France’s finance minister, Bruno Le Maire said Renault is in such dire straits that it “can disappear.” That’s because it is trying to negotiate a $5.4 billion loan from the French government. Without it Le Maire suggests the Nissan/Renault/Mitsubishi alliance may be gone this week. The French government owns 15% of Renault.
The French government wants to see Renault’s strategy to reduce costs
The government is keeping pressure on Renault to, among other things, make more eco-friendly vehicles. It wants to see Renault’s strategy to reduce costs and create more popular vehicles. Without that strategy and also agreeing to the government’s desire for eco-friendly vehicles there will be no money.
Nissan is in just as bad of shape. The last four quarters have seen massive profit declines. Its operating profit fell 83% from the same time last year. Part of that is due to an aging portfolio that relied on shoving vehicles out the door at almost no profit to keep the iron moving. The other part is a leadership vacuum caused by Ghosn’s arrest.
When the pandemic hit in February it only exacerbated the problems
Post Ghosn there have been a number of leadership changes causing blurred strategy and conflicts between the three companies. Rumors were denied at the beginning of 2020 that the alliance would be broken up according to CNN Business. When the pandemic hit in February it only exacerbated the problems and lack of capital.
Manufacturing has remained mostly separate, never fulfilling the alliance potential. Renault has never used Nissan’s and Mitsubishi’s network in the US to its advantage since it has no footprint here. Former head Ghosn claims his arrest was to stop the three companies from actually merging. He says Nissan wanted to remain independent of Renault’s oversight.
Nissan has always denied that. It says Ghosn was underreporting income and misappropriating funds. But when Renault took over in 1999 Nissan was near bankruptcy. Its fortunes have always seemed to rely on Renault. Post Ghosn as it has forged its own path it is once again back to losing billions of dollars in a single year.
Without the French government’s help, Renault can’t survive
This week or next will determine if Renault can survive. Without the French government’s help it can’t. But the government owns 15% of the company so in the end it will probably be propped up.
For Nissan, it is ready to reveal a plan that is already rumored to include plant closings, reducing global production by at least 20%, and cutting its workforce by more than 20,000.
As the coronavirus has advanced the weaknesses already existing for years in the alliance there will be plenty of reductions and cutting for it to survive post-pandemic.