By Chester Dawson 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 12, 2018).

DETROIT -- The white-hot tensions between Nissan Motor Co. and Renault SA following the arrest of longtime alliance leader Carlos Ghosn show that it has never been easy for the global auto industry to pull off mergers and partnerships.

Putting auto makers together often makes sense -- on paper -- because of potential cost savings, but such pairings can be difficult to run successfully because of culture clashes, turf wars and difficulties integrating technologies across vehicle lineups, management experts and industry analysts say.

Companies often have problems trying to blend management teams, while engineers can be protective of their work, unwilling to bend to new approaches. Executives at car companies also fear that too much blending of parts and plans can blur distinctions between brands, making models look too similar, industry executives and analysts say.

Daimler AG's merger with Chrysler lasted less than a decade in part because leaders struggled to bridge the cultural gap between the German and American companies.

Former DaimlerChrysler Chief Executive Dieter Zetsche said at the time of the breakup that the synergies that were hoped for proved elusive. The companies were unable to find a way to blend technologies on Daimler's premium Mercedes-Benz cars with Chrysler's lower-priced, mass-market vehicles.

In the early 2000s, General Motors Co. hoped to rebalance its lineup of larger vehicles with smaller, more fuel-efficient cars and struck partnerships with a number of auto makers in Asia and Europe, taking 20% equity stakes in Japan's Suzuki Motor Co. and Italy's Fiat SpA. But those deals foundered in part because of differing management philosophies.

And in 2009, Volkswagen AG paired with Suzuki, only to have an international court ruling dissolve the marriage six years later amid mutual accusations of bad faith after Suzuki sourced engines from a competitor.

"Strategic cooperation can make sense, but it's always a question of needing to protect your brands" first, Harald Krüger, BMW AG's CEO said last month at the Los Angeles Auto Show. BMW has historically avoided broad alliances with other car makers, believing it is more agile when operating independently.

In many ways, the globe-spanning alliance that Mr. Ghosn forged over the course of nearly two decades at Nissan and Renault was unusual in both scale and longevity. In 2016, the alliance added a third partner, Mitsubishi Motors Corp., which brought the group's combined sales to 10.6 million vehicles and helped catapult it into the top ranks of the world's largest auto sellers.

Behind the scenes, the three companies pooled resources on technology, manufacturing and research, helping them to better compete with Volkswagen, GM and other auto giants. The companies are knitted together in a cross-shareholding arrangement in which Renault holds a 43.4% stake in Nissan and Nissan holds a 15% stake in Renault. Nissan also owns a controlling 34% stake in Mitsubishi.

Mr. Ghosn, a strong-willed and metrics-driven executive who during his time at the alliance held leadership positions at all three car companies, prevented rivalries from unraveling the three-way partnerships, analysts say. But the process of integrating the alliance's engineering and new-car development was slow going. Annual cost savings for the alliance first exceeded EUR1 billion ($1.14 billion) in 2009 -- a full decade after its founding, illustrating how long it can take to achieve such expense reductions.

Mr. Ghosn, who was arrested on Nov. 19 after arriving in Japan, remains in custody on suspicion of financial misconduct. On Monday, Tokyo prosecutors formally charged him with allegedly conspiring to report only about half of his compensation during the five years ended March 2015.

Nissan was also indicted and issued a statement apologizing for what it called "false disclosures."

Neither Mr. Ghosn nor his lawyer, Motonari Otsuru, have spoken publicly about the case. Japanese public broadcaster NHK reported that Mr. Ghosn denies wrongdoing and his lawyer's office declined to comment.

Since he was detained, he has been removed as chairman of Nissan and Mitsubishi. And while he retains his CEO and chairman titles at Renault, the company has appointed executives to fill those posts on an interim basis.

In recent weeks, the friction between Mr. Ghosn and his successor at Nissan, Chief Executive Hiroto Saikawa, has become apparent. In an address to employees, Mr. Saikawa accused Mr. Ghosn of amassing too much power during his time at the alliance.

Nissan, Renault and Mitsubishi issued a statement late last month reaffirming support for their alliance.

Still, alliances that cross international borders can be prone to unraveling because car companies often have deep ties to national governments. France, for instance, owns a 15% stake in Renault. That has made it difficult for auto executives to close plants and achieve other cost savings, because governments can create obstacles to protect workers.

Harbir Singh, a management professor at the University of Pennsylvania's Wharton School of business, said the auto industry isn't alone in facing these challenges, noting that the average success rate for corporate alliances -- including those in other sectors -- is less than 50%. That is mostly due to companies overestimating savings and underestimating the complexity of melding their businesses, Mr. Singh said.

VW has done better at maximizing efficiencies with the stable of European auto brands it owns, such as Audi, Bentley and Porsche. Fiat's merger with Chrysler has resulted in profit growth for the combined Fiat Chrysler Automobiles NV, but it has taken years to achieve that financial improvement.

Auto makers are also forging more limited alliances focused on technologies that are reshaping demand for personal transportation as the industry faces new threats from deeper-pocketed rivals in Silicon Valley.

Honda Motor Co. has long eschewed alliances, but in October, it invested $2.75 billion in GM's self-driving car unit. Honda is also working with GM to develop electric cars and has said it would buy batteries from the Detroit auto giant.

Write to Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

December 12, 2018 02:47 ET (07:47 GMT)