The Renault-Nissan Alliance posted record synergies of €3.80 billion (Rs 29,047 crore) in 2014, up from €2.87 billion (Rs 21,938 crore) the previous year.
10 Jul 2015 | 3814 Views | By Autocar Professional Bureau
The Renault-Nissan Alliance posted record synergies of €3.80 billion (Rs 29,047 crore) in 2014, up from €2.87 billion (Rs 21,938 crore) the previous year.
Purchasing, engineering and manufacturing were the biggest contributors. The launch of the Alliance’s first Common Module Family (CMF) vehicles, as well as the recent convergence ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
The Renault-Nissan Alliance posted record synergies of €3.80 billion (Rs 29,047 crore) in 2014, up from €2.87 billion (Rs 21,938 crore) the previous year.
Purchasing, engineering and manufacturing were the biggest contributors. The launch of the Alliance’s first Common Module Family (CMF) vehicles, as well as the recent convergence of four key units, helped drive synergies in all three areas.
Synergies are generated from cost reductions, cost avoidance and revenue increases. Only new synergies (not cumulative) are taken into account each year. Accounting for synergies helps Renault and Nissan determine if they are meeting their performance objectives. More significantly, the net savings and revenue enhancements enable both automakers to offer higher-value vehicles to customers around the world.
“Our Common Module Family system continues to drive synergies in all major areas, from purchasing to vehicle engineering and powertrains,” said Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance. “At the same time, the recent convergence of four key functions at Renault and Nissan – Engineering, Manufacturing Engineering & Supply Chain Management, Purchasing and Human Resources – is accelerating the momentum.”
Renault and Nissan converged the four functions on April 1, 2014. While Renault and Nissan remain separate companies, each function is led by a common Alliance executive vice president. Thanks to the convergence, the Alliance expects to overachieve on its goal of generating €4.3 billion (Rs 32,869 crore) in annualised synergies by 2016. That’s up from €1.5 billion in 2009.
CMF and cross production drive savings
The Common Module Family is the Alliance’s unique system of modular vehicle architectures and an increasing source of synergies.
CMF enables Renault and Nissan to build a wider 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 (like the upcoming Renault Kwid in India), while mid-sized vehicles utilize CMF-B, and the largest vehicles use CMF-C/D.
In February 2014, Nissan launched an all-new version of the popular Qashqai crossover in Europe. The Qashqai is built on CMF-C/D and is the third CMF model for Nissan. In 2013, Nissan launched the Rogue SUV in the United States and X-Trail crossover SUV in China. Earlier this year, Renault launched its first CMF vehicles: the New Espace and the Kadjar. Both vehicles are built on CMF-C/D as well.
In 2015, Renault will launch the Kwid in India. The Kwid is the first Alliance car built on the CMF-A architecture and will be produced at the Renault-Nissan plant in Chennai. Datsun will launch a vehicle on the same platform in 2016.
By 2020, the Alliance expects 70 percent of its vehicles to be built on CMF architectures.
The cross production of vehicles is also a major driver of manufacturing synergies. Cross production is expected to accelerate across the Alliance following the rollout of the Alliance Production Way (APW) at all plants around the world by the end of 2015. The APW manufacturing system is the result of best practice sharing throughout the organization and allows plants to make better use of their capacity by enabling them to produce both Renault and Nissan vehicles.
In 2014, Nissan began production of the Rogue crossover in Renault’s plant in Busan, South Korean, to meet stronger-than-expected demand in the U.S.
The Avtovaz plant in Togliatti, Russia, is the Alliance’s biggest production base in the world with capacity of nearly one million vehicles per year. The plant produces vehicles under four brands – Lada, Renault, Nissan and Datsun. The Alliance owns a majority stake in the joint venture that controls Avtovaz, Russia’s largest automaker.
The Alliance is also increasingly benefitting from synergies in other areas, such as sales and marketing.
Also read: Jérôme Olive to head Renault-Nissan Alliance’s manufacturing & supply chain operation