Blog of RENAULT NISSAN Alliance

Dear Mr. Betts,

I read the letter with great interest that you published on January 27, 2011 which you addressed to my CEO, Carlos Ghosn. By means of introduction, I am a member of the Renault-Nissan Alliance management board and have spent my last twenty professional years almost evenly divided between Renault and Nissan. Over that period of time, I have worked for Carlos Ghosn both as a Nissan employee and as a Renault employee, giving me a unique perspective on the Alliance, and also on the man himself.Although the comments below are mine, I am also confident I reflect the sentiments of Carlos Ghosn and the entire Renault-Nissan Alliance.

The starting point of your letter is our share price performance. True, Renault’s share price has not performed as well as the companies you compare us to as we have exited the crisis. But, to be factually correct, you could have also pointed out that at least one other prestigious German auto company trailed Renault in the same period and not given your readers the impression we were at the bottom of the pile. You could also have mentioned our direct French competitor, whose share performance was identical to ours in the period. There might be some lessons to be learned by comparing us to the entire sector and not just to the two companies you selected.

If PSA’s share price performance is identical to ours; that should eliminate the first reason you are offering up as an explanation for trailing VW and Fiat, which is French government intervention. It’s hard to imagine the French government intervening in PSA’s affairs! However, in future writings, you might want to see if there are any other reasons that might explain why French car companies have underperformed the sector, such as the industrial competitiveness of the country as a whole.

Concerning the electric car, you may have been misinformed in writing that the French government insisted on Renault leading the way on this technology. Why you have chosen to ignore Nissan’s role in this technology to the point of not even mentioning that their electric car, the Nissan LEAF, is already on sale and was voted Europe’s car of the year a few weeks after launch is a mystery. The French government has nothing to do with this technology that the Alliance has been working on for years. As an observer of the global automotive sector, surely you must have seen that all major companies showed electric prototypes at the last Paris and Detroit motor shows. Could it be that the Renault-Nissan Alliance has a competitive edge by having come to market before them? The French government has clearly recognized our leadership, along with others. Why would the United States, the United Kingdom, Japan, Portugal, Israel, Denmark and many other countries, states and cities be supporting us directly in this adventure? If you want to say that we’re ahead of the pack, then I’m sure we’ll agree!

But let’s get to the crux of this matter. The question you raise is about the value that the Alliance has and is creating. To the question of knowing if we are getting the most out of the Alliance with Nissan, the answer is certainly that there is room for improvement. Let’s start with the facts. The Renault-Nissan Alliance is soon going to enter its twelfth year, a feat in longevity that no other car alliance has ever achieved. Rather than comparing us to what Fiat and Chrysler might do, why not compare us to what the others have done since 1999? You would have to include the alliances that ended in divorce, the brands that disappeared, the companies that went bankrupt and all the countless “headline” projects that never happened.

But somehow, without explaining why, you come to the conclusion that in order to outperform our competition, (which you seem to have narrowed down to Fiat and their intentions) we should contemplate an outright merger of Renault and Nissan.

Value creation comes first and foremost from performance. Corporate structures, just like departmental organizations in complex companies are tools or enablers. In and of themselves, they have little meaning; they only become relevant to the extent that they foster improved performance in a competitive environment. As CEO of Renault and Nissan, Mr. Ghosn’s first duty is to ensure that each company is performing well; in that regard, he’s no different from any CEO in the world. Each company will be different, each has different potential, but each must be able to deliver an optimal level of performance in its competitive set.

As you point out, he has had the fortune to have been raised in a multi-cultural family and to have traveled the world. And as the years have passed giving him the opportunity to observe an increasingly globalized world, respecting people and their identities appears even more of a necessity today than ever before. This is true of people, but it’s also true of companies. If Renault and Nissan are still together in alliance after almost twelve years, if others have joined in varying degrees such as Daimler and Avtovaz with Renault and Dong Feng and Mitsubishi with Nissan, it might well be because they see in the alliance solutions and an opportunity to enhance their own performance.

It has certainly not escaped him that the world of 2011 is different from what it was in 1999. Where you are suggesting a narrow response in merging Renault and Nissan, there is room for evolution based on a more open-minded dynamic approach which would allow the structure of the Alliance to find its new paradigm under the condition that the respective identities of its participants be preserved; the two are not incompatible. By saying that it is unrealistic to imagine Nissan becoming French, no more so than imagining Renault becoming Japanese, are you not implicitly saying the same thing to those who might be tempted by the apparent simplicity of a merger?

Dominique Thormann
Member of the Renault-Nissan Alliance Board