Renault-Nissan Alliance posts record Rs 23,519 crore synergies in 2013

The Renault-Nissan Alliance has posted record synergies of 2.87 billion euros (Rs 23,519 crore) in 2013, up from 2.69 billion euros (Rs 22,044 crore) in the previous year. Purchasing, powertrain and vehicle engineering remained the biggest contributors as the Alliance geared up for the launch of its first Common Module Family (CMF) vehicles.  

Purchasing, which is jointly managed by Renault-Nissan Purchasing Organization (RNPO), generated 1.036 billion euros (Rs 8,490 crore) in synergies. Vehicle engineering, which relates to common platforms and components, accounted for 714 million euros (Rs 5,851 crore). The co-development and exchange of powertrains accounted for 525 million euros (Rs 4,302 crore).

Synergies are derived from cost reductions, cost avoidance and revenue increases. Only new synergies – not cumulative synergies – are taken into account each year. Synergies help both Renault and Nissan meet performance objectives and, significantly, enable the carmakers to deliver higher value vehicles to customers around the world.

CMF and emerging markets drive synergies

Common Module Family (CMF) is the Alliance’s unique system of modular architecture and an increasing source of synergies. CMF enables Renault and Nissan to build a wide range of vehicles from a smaller pool of parts, while at the same time increasing customer choice and quality. Small vehicles are based on CMF-A, while midsized vehicles are CMF-B, and the largest vehicles are CMF-C/D. 

In November 2013, Nissan began selling its first vehicle on CMF in the US – the new Rogue SUV is built on CMF-C/D. The following month, it began selling the X-Trail crossover SUV in Japan, also based on CMF-C/D, and in February this year, sales of the Qashqai crossover began in Europe.

The first model based on CMF at Renault will be the replacement for the Espace, which will debut in 2015 on CMF-C/D.

In 2013, the Alliance also began development work on CMF-A, the most affordable category of cars. Production of CMF-A vehicles will begin in 2015 at the Renault-Nissan Alliance plant in Chennai, India.

“Development of CMF vehicles is helping to drive synergies in all our major business areas – from purchasing to vehicle engineering and powertrains,” said Christian Mardrus, Alliance executive vice-president for Renault-Nissan BV and the Alliance CEO Office. “CMF will continue to be a major driver of our synergies in the future with 70 percent of our vehicles expected to fall within the CMF scope by 2020.”

The Alliance also generated synergies in emerging markets, such as India and Russia, where Renault and Nissan manufacture vehicles together at the same plants. Last year, Renault began sales of the Duster SUV in the UK and South Africa. The right-hand-drive vehicles are produced at Renault-Nissan Automotive India plant in Oragadam, near Chennai. The plant, which has a capacity of 400,000 vehicles per year, splits production between Renault and Nissan vehicles.

Also last year Nissan began sales of the Almera sedan, which is built in Togliatti, a manufacturing complex shared with partners Renault and AVTOVAZ, Russia’s largest automaker.

Contribution from non-traditional areas and convergence

The Alliance is also increasingly benefitting from synergies in non-traditional areas, such as sales and marketing. In 2013, the Alliance signed two major global fleet contracts with pharmaceutical giant Merck and global information technology services group Atos.

“Thanks to our partnership, we are able to offer customers an extensive range of vehicles around the world – from Dacia to Infiniti,” said Mardrus.

Moving forward, the Alliance’s focus on ‘convergence’ is expected to increase synergies in four key business functions: Engineering, Manufacturing & Supply Chain Management, Purchasing, and Human Resources.

While Renault and Nissan remain separate companies, these four business functions were converged on April 1, each led by a newly appointed Alliance Executive Vice President. As a result of the convergence, the Alliance expects to achieve at least €4.3 billion (Rs 35,238 crore) in annualised synergies by 2016, up from 1.5 billion euros in 2009 when the Alliance first began recording synergies.