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Renault-Nissan Alliance posts record €2.9B in synergies in 2013 ahead of launch of first CMF vehicles

Renault-Nissan Alliance posts record €2.9B in synergies in 2013 ahead of launch of first CMF vehicles

The Renault-Nissan Alliance posted record synergies of €2.87 billion (US$3.9B) in 2013, up from €2.69 billion (US$3.7 billion) 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 (US$1.4 billion) in synergies. Vehicle engineering, which relates to common platforms and components, accounted for €714 million (US$975 million) . The co-development and exchange of powertrains accounted for €525 million (US$717 million.

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 enable the carmakers to deliver higher value vehicles to customers around the world.

CMF and emerging markets drive synergies. The Common Module Family (CMF) engineering architecture, introduced in 2013, is the Alliance’s system of modular architecture and an increasing source of synergies. CMF is an engineering architecture that covers Renault/Nissan Alliance vehicles, from one or more segments, based on the assembly of compatible Big Modules: engine bay, cockpit, front underbody, rear underbody and electrical/electronic architecture. Therefore, a CMF is not a platform; it can involve several platforms. A platform is a horizontal segmentation; a CMF is a cross-sector concept.

Big Modules must satisfy the pre-requisites of the Alliance Integrated Manufacturing System (AIMS) process. This enables the same product to be manufactured at several different sites or many products to be manufactured at a single site; simplifies planning, facilitates management, enables adjustments to global capacity and lowers entry costs. When a plant starts manufacturing a new product, AIMS limits the additional investment for the first volume production of a new model.

CMF is an additional tool that goes further than carryovers on a single platform, to expand the product range. The trend will be to increase the modules common to several platforms with a view to standardizing components and increasing the number of vehicles per platform.

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 mid-sized 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 United States: the new Rogue sports utility vehicle is built on CMF-C/D. The following month, Nissan began selling the X-Trail crossover SUV in Japan, also based on CMF-C/D. In February, Nissan began selling the Qashqai crossover 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. CMF will continue to be a major driver of our synergies in the future with 70% of our vehicles expected to fall within the CMF scope by 2020.

Emerging markets. 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 sports utility vehicle in the UK and South Africa. The right-hand drive vehicles are produced at Renault-Nissan Automotive India Private Limited in Oragadam,India, 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.

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 1 April, 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 (US$5.87 billion) in annualized synergies by 2016, up from €1.5 billion (US$2.05 billion) in 2009 when the Alliance first began recording synergies.

Renault and Nissan have been strategic partners since 1999, and together sold 8.3 million cars in nearly 200 countries in 2013. The Alliance also operates strategic collaborations with automakers including Germany’s Daimler, China’s Dongfeng, and India’s Ashok Leyland and recently took a majority stake in Russia’s top automaker, AVTOVAZ.