Renault and Nissan plan to set up a joint European marketing organization

May 15, 2000

Renault and Nissan intend to implement a common sales and marketing organization in Europe to achieve profitable growth for the Alliance. The Alliance's mid term objective is to grow its market presence to 17 per cent. The sales growth will be achieved through a vigorous and distinct development of the brand image for each company.

Overall benefits to be achieved over a five-year period (2000-2005), estimated at EUR 1 billion (FRF 6.5 billion) would contribute to the Nissan Revival Plan and to the competitiveness of Renault and Nissan in a market where their combined sales totaled 2,395,456 units in 1999.

After consultation with the employee-representative bodies, the plan will be implemented from July 2000 with completion by the end of 2003 in seven countries: France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdom⁽¹⁾. It would also involve both partners' current European marketing organizations.

At the local / dealer level, the new Renault-Nissan sales and marketing organization will be based on a dealer network of common business partners. They will be fewer than at present, but more powerful, and will coordinate their own network of brand-related sales and service outlets in expanded territories. 

These common "hubs" are part of the Alliance strategy to anticipate changes in car distribution across Europe. They are already being developed. Benefiting from significant economies of scale, thanks to better geographical coverage and considerably higher sales volumes, each of these common hubs will set up its own back-office structure serving both the Renault and Nissan brands. The consumers will continue to experience separate sales and services for each brand.

These common hubs will pool all those services which are not in direct contact with customers and not related to brand identity (e.g. parts management and logistics, administrative services). With their competitiveness enhanced, the Alliance's common partners will be able to invest to raise standards of service quality and customer satisfaction, for both Renault and Nissan. 

Wherever possible, depending on local factors, financial capability, and the efficiency of company managers, some of the current Renault and Nissan dealers will be encouraged to invest in setting up these common hubs and to manage them.

Moreover, in a number of major European urban centres considered to be strategic, Renault will support, in its own network of branches, the development of Nissan sales by applying the same hub strategy.

Some 70 per cent of Renault and Nissan hubs will be common by the year 2002, and 90 per cent by 2005. These hubs, which will number 460 in 2005, could account for three quarters of Renault's sales and two thirds of Nissan's volume by 2002, with average annual sales of 2,200 vehicles for the Renault brand (more than twice the current average figure) and nearly 700 vehicles for the Nissan brand (nearly three times the current average). The hub system alone will enable Renault and Nissan to generate gains of more than EUR 230 million (FRF 1,500 million) by 2005, based on additional sales and cost reductions, while improving their marketing effectiveness.

At the national level, all hubs would be backed up by common marketing support. In each of the seven countries involved, Renault and Nissan will pool all their back-office functions which are not directly related to brand identities or customers, to provide each hub with the necessary interface for support functions. These functions include marketing procedures which are not brand-related and other support services. 

In Germany, the Netherlands and Switzerland, all Renault and Nissan sales and marketing operations will be led by Renault, with a Nissan brand management team responsible for the Nissan front office.

In France, Italy, Spain and the United Kingdom, each brand will retain its own management and responsibility for marketing, relying upon back-office services from Renault.

Independently of the management structure chosen, a single location is envisaged for Germany, Switzerland, the Netherlands and the United Kingdom, for reasons of efficiency and facility costs.

At the European level, the Renault and Nissan sales and marketing structures will be organized similarly to support both brands with common European back-office operations. These support functions, under the responsibility of Renault, will be concentrated in Paris and will include non brand-related marketing services and other support services. The relocation of these services will commence by October 2000. In order to be close to the common back office, Nissan Europe intends to move its front-office marketing services to its branch in the Paris area by January 2001. The parts and accessories function will remain in the Netherlands. Nissan will maintain its European headquarters in Amsterdam which will continue to be responsible for the Nissan operations in Europe. 

Finally, both companies will support each other by extending their product offerings: Nissan will adapt, badge and market light commercial vehicles from Renault. Renault will expand its SUV range by adapting some Nissan products (existing or under development). The marketing plan will be finalized before October 2000. 

In addition to the cross-benefits generated by the hub system by 2005 (EUR 230 million), the new organization will produce cumulative gains of EUR 400 million (FRF 2,620 million) by 2005, through reductions in operating costs as well as increases in the parts and accessories business. Including cross-badging operations, the global benefits will amount to at least EUR 1 billion.

A headcount reduction of 9 % by 2003 is expected in the 5,600 staff of the combined Renault and Nissan sales and marketing organizations. The reduction in the Nissan workforce (down 55 %) will be partly offset by an increase in Renault personnel to supplement the new back-office functions (up 8 %).

Combined Renault and Nissan sales in Europe in 1999 totaled 2,395,456 passenger cars and light commercial vehicles (cars + LCVs), for a combined market share of 14.2 per cent. Renault sold 1,909 932 vehicles in Europe in 1999, with a market share of 11.3 per cent, thus confirming its position as the leading car + LCV brand in Europe. Nissan sold 485 524⁽²⁾ passenger cars and light commercial vehicles in Europe in 1999, equivalent to a market share of 2.9 per cent.

The plan envisaged for Europe is in line with the Alliance's global strategy, which provides for the company with the stronger presence to give active support to its partner, for the benefit of the profitable growth of Renault and Nissan as a whole. Thus while Renault is supporting the development of Nissan in Europe, Nissan is supporting the development of Renault in Mexico, Australia, and Japan.

Notes:

(1) Nissan owns national sales companies in these seven markets.
(2) Total number of units sold in EU countries.