Thursday 3 July 2014

Renault-Nissan “synergies” & CMF are working

Renault-Nissan Alliance claims record “synergies” of €2.87 billion in 2013, up from €2.69 billion in the previous year.

“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. The company claims CMF and emerging markets are driving “synergies”.

Purchasing, powertrain and vehicle engineering remained the biggest contributors to “synergies” as the Alliance geared up for the launch of its first Common Module Family (CMF) vehicles.  

Purchasing, jointly managed by Renault-Nissan Purchasing Organization (RNPO), generated €1.036 billion in “synergies”. Vehicle engineering, which relates to common platforms and components, accounted for €714 million. The co-development and exchange of powertrains accounted for €525 million.

                                    The basis of CMF

CMF is the Alliance's system of modular architecture and an increasing source of synergies. It 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 based on CMF in the US; 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 low-cost category of cars. Production of CMF-A vehicles begins 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," claims Christian Mardrus, Alliance executive vice president for Renault-Nissan B.V. and the Alliance chief executive office. "CMF will continue to be a major driver of our synergies in the future with 70 per cent 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 sports utility vehicle in the UK and South Africa.

Right-hand drive vehicles are produced at Renault-Nissan Automotive India Private Limited in Oragadam, near Chennai, India. The plant, with a capacity of 400,000 vehicles per year, splits production between Renault and Nissan vehicles.

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.

The Alliance claims it is 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.

The Alliance's focus on "convergence" also 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 in annualized synergies by 2016, up from €1.5 billion in 2009 when the Alliance first began recording synergies.

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