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)
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