Renault-Nissan Alliance Says Savings at Record Last Year

Renault SA (RNO) and Japanese partner Nissan Motor Co. (7201) said annual cost savings from their 14-year-old alliance jumped 54 percent to a record in 2012 as the carmakers increasingly used common parts.

Cooperating on purchasing, manufacturing and design resulted in new cost reductions of 2.69 billion euros ($3.5 billion) last year versus 1.75 billion euros in 2011, the companies said today in a joint statement.

Global carmakers are under increasing pressure to keep costs down as they push into developing economies such as China to reduce reliance on domestic markets with slower growth. Renault, based in the Paris suburb of Boulogne-Billancourt, and Yokohama-based Nissan have had a sales and manufacturing partnership since 1999. Fiat SpA (F), which has its headquarters in Turin, Italy, is increasingly using common components with Chrysler Group LLC, the U.S. auto producer it controls.

“Synergies and greater economies of scale allow Renault and Nissan to compete in an elite tier of the world’s top automakers,” Christian Mardrus, managing director for logistics for the Renault-Nissan alliance, said in the statement. “We expect to generate even more synergies going forward, particularly in emerging markets such as Brazil, Russia, India and China.”

Renault was trading down 0.3 percent at 52.65 as of 11:14 a.m. in Paris, paring a decline of as much as 2.1 percent earlier today. The stock has gained 29 percent this year, valuing the company at 15.6 billion euros.

Modular Production

The French carmaker said on June 19 that it’s introducing a modular-production strategy with Nissan to build more vehicles together. The common module family technology will help the carmakers cut engineering and process costs 30 percent to 40 percent and spending on parts 20 percent to 30 percent by 2020, Jean-Michel Billig, executive vice president of engineering and quality, said at the time.

The technology, in which suppliers provide larger components made of smaller parts that were previously installed separately, will be introduced this year and next on production of the the partners’ compact and larger models. The program will be expanded to their subcompacts in 2015 and their city cars in 2016.

Renault and Nissan vehicles will share about 50 percent of parts by 2020 through the new strategy, according to Billig. The setup will help the French company maintain research and development spending at current levels of 8 percent to 9 percent of full-year revenue, he said on June 19.

The alliance’s biggest cost savings in 2012 came from purchasing at 851 million euros, powertrain operations at 709 million euros and vehicle engineering at 546 million euros, the companies said today.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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