Case Study Of Renault And Nissan

Renault-Nissan merger

This merger happened in the year 1999 where Renault acquired 36.8 percent equity stake in Nissan, 22.5 persent stake in Nissan Diesel and 100 percent in Nissan’s European Finance subsidiaries amounting to USD5.4 billion. This merger is based on the principal that both companies will share resources but will retain their separate identities. This was done to improve their individual competitiveness. While Nissan is somewhat stable in North America and Asia, it is supported by Renault in Europe and South America. They share responsibilities for Africa and Middle East.

Both the companies intend to maximize synergies through their strengths in product line, R&D, marketing, procurement, and personnel training. This would result in cost reductions and greater market penetration globally through better cooperation.

As a member of this strategic alliance, the Renault would approach 'up to the minute’ technology, a global network and advanced managerial expertise. The impact of this alliance has been favourable. For example, the return of equity (the ROE) for Renault in 2002 and 2003 is credited to the sharp increase in profits for Nissan. The Nissan Recovery Plan which was started by the group in 1999 focused on profit and international reach caused increased net income and therefore increased in the ROE.

In addition, the substantial savings in the cost have been completed by a common strategy of purchase and amount a common provider base. Common platforms have been developed to reduce the time for the new product introduction.

Cooperation is strengthened in the development and so is the use and sharing of the common power train components (engines and gearboxes). These efforts have led to a decrease in working ca...

... middle of paper ...

...moderately in 2002 and then again sunk in 2003. Product portfolio of Chrysler did not have enough products to offset the increased competition pressure in the segment. The aging model line contributed to the fall. In 2003, the Chrysler Group segment turnover declined, mainly due to the appreciation of euro against dollar, higher sales incentives and lower unit sales.

Chrysler executives’ retired, quit or in many cases were driven out as a result of the merger. Therefore, the flair for doing things cheap, fast and lean could not seep into the merged entity. On the other hand, Chrysler has improved its productivity by 8.3 percent and achieved cost savings in design and engineering.

The share of the combined entity on the market has been falling. Global market share for 2003 is 7.97 percent, and this fall is due to concentration problems and sluggish sales of Daimler.