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Renault & Nissan Revamp Alliance to Combat Coronavirus Crisis

Zacks Equity Research
·3 mins read

Members of the world's largest car-making alliance, Renault SA RNLSY, Nissan Motor Co. NSANY and Mitsubishi Motors, recently announced several initiatives as part of a new business model of cooperation focused more on efficiency and competitiveness than on volumes.

The companies will reduce the overall number of models being sold, use shared platforms for production, and focus on their existing geographic and technological strengths. These firms are aimed at cutting costs and boost profitability amid the coronavirus pandemic.

Nissan will take charge of the development of autonomous driving technology in North America, the Middle East and key markets in Asia like China and Japan. Renault will focus on developing electric vehicles in Europe and South America. Meanwhile, junior partner Mitsubishi has been allocated parts of Southeast Asia and Oceania.

Further, Renault and Nissan are anticipated to announce job cuts and plant closures very soon. Nissan reportedly aims to reduce its global production capacity by 20% and close a facility in Barcelona. It might also cut 20,000 of its workforce in a bid to survive the coronavirus crisis. Meanwhile, Renault might stop manufacturing two models in Spain and transfer the production to Nissan's England plant, in sync with the new strategy. Under the new plan, more plants will manufacture cars for each company. Notably, in Latin America, two factories will manufacture Renault and Nissan SUVs, in the days to come.

Renault and Nissan have been partners since 1999, but never had a complete merger. The alliance had been in crisis amid the departure of Renault’s CEO Carlos Ghosn, who was arrested in 2018 over allegations of financial misconduct. The firm delivered its worst financial performance in a decade in 2019 and the coronavirus pandemic further added to the woes. Nissan is also going through a rough patch. The virus outbreak has become a concern for various other global auto biggies, including Tesla TSLA, Honda Motor HMC, Toyota Motor and Volkswagen AG. The automakers have been making changes to the manufacturing processes and chalking out several cost-containment strategies to sail through the crisis. 

The pandemic made it essential for Renault and Nissan to strengthen their alliance and share the massive cost of developing new models and technology.

While Nissan carries a Zacks Rank #4 (Sell), Renault is a Zacks Ranked #3 (Hold) stock.

Shares of Renault and Nissan have depreciated 47.5% and 28.9%, respectively, year to date, wider than the industry’s decline of 16.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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