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TOKYO/PARIS (Reuters) - Over the past decade, the Nissan-Renault partnership has been touted as a match made in heaven -- the only one, some claimed, that actually worked after many failed alliances by other automakers.
Aiming to be a major global player, the small French automaker took a 37 percent stake in Nissan Motor (7201.T) in 1999, sending one of its top talents to help revive the deadbeat Japanese firm that nevertheless sold more cars than it did.
Carlos Ghosn, now CEO of both companies, soon became the most celebrated auto executive for converting a mountain of losses and debt into a record profit for Nissan in just two years.
But, as the partners eye their 10th anniversary next month, the optimism has faded.
Nissan this week forecast a first net loss since the alliance was formed, citing a strong yen and sales slump driven by the global recession. Renault (RENA.PA) followed with a 78 percent plunge in net profit and dropped its once-sacrosanct profit targets for 2009.
"The alliance has stagnated," said Kurt Sanger, a Tokyo-based auto analyst at Deutsche Securities. "The next push was supposed to be the joint projects in India and Morocco. The business model was to get high volumes and high profits quickly, and that's not going to happen, at least for now."
Desperate to save cash, Nissan is postponing indefinitely its participation in a joint factory project with Renault in Morocco. Their planned joint car factory in the southern Indian city of Chennai will start at a reduced capacity in 2010.
That means a loss of potential savings.
Ghosn said this week Nissan and Renault would identify opportunities for "deeper synergies" with the goal of contributing $1 billion each in free cashflow in 2009. Details on specific measures are to be announced in three months.
Industry experts said it was hard to imagine much improvement as the companies had already hit the wall with previous projects.
A big, though little-noted, example is the planned overhaul of the Nissan Micra/March. The high-volume compact car was based on the alliance's first common "B-segment" platform, or basic body structure, also used for Renault's Clio and Modus models.
For the Micra's remodeling, Nissan is developing a new and smaller "A" platform that Renault has no immediate plans to use.
Meanwhile, Renault will focus on its hit Logan car in the entry-level segment.
Analysts said the Logan platform, in turn, would have been the logical choice for Nissan to build its own low-cost Livina series sold in emerging markets, but Nissan went its own way.
There's no doubt Nissan and Renault have made savings over the years by sharing development and infrastructure costs, but not to the extent they would have investors believe, some say.
"I think regional scale is a much better attribute than global scale, and the alliance hasn't really given Renault the scale to be competitive in Europe," said Michael Tyndall, an analyst at Nomura International.
The two carmakers cross over in few markets outside Europe, where sales and production are sinking fast.
Renault has no presence in the United States or China, while Nissan is a niche player in Brazil, a major market for Renault.
"The seas were already fairer for Nissan. Renault is stuck in the world's most competitive region as one of the smaller players," Tyndall said.
Indeed, Nissan's vehicle sales have spiked 41 percent since 2000, thanks to growth in China and the United States, while Renault's have grown just 1 percent.
Nissan shares have fallen 40 percent since Renault first invested in it in March 1999, while Renault has lost 55 percent. Renault now owns 44 percent of Nissan, which has 15 percent in its French partner.
Ghosn said that while there may have been some management missteps along the way, the economic crisis that has hurt the whole industry was mainly to blame for Nissan's and Renault's current plight.
But his push for a no-holds-barred approach to cooperation was a tacit admission that the effort so far was not enough.
"I think we are today ready to do things that we were not ready to do three years ago," he said.
The alliance has also touted its joint parts purchasing entity, the Renault-Nissan Purchasing Organization, as evidence of the scale of cooperation since it buys 90 percent of the companies' components.
But a former insider said it meant little when so few of the key components were shared.
"You might have some overlap. But the big ones are going to happen if you buy key components for the Clio or Micra," the person said, asking not to be named. "That's why the breakdown in the shared platforms is a big tragedy for the alliance."
That may be why Ghosn had been eager to expand the alliance to include a U.S. partner, at least until the financial crisis and the ensuing cash drain ruled it out.
When Ghosn entered talks with General Motors Corp (GM.N) for such an alliance in 2006 at the urging of a top GM shareholder, Kirk Kerkorian, the Franco-Japanese side came up with an estimate for annual savings exceeding $10 billion for the U.S. auto giant alone, a person with direct knowledge of those discussions said.
The talks ended swiftly when GM demanded payment from Nissan and Renault in return for a tie-up that management never wanted.
Either way, analysts said an addition of another player was no guarantee for a big boost for the alliance.
"I don't believe volume alone dictates success," said Deutsche's Sanger.
"If you're saving some money between two companies, but not 100 percent efficiently, it's not as good as doing it 100 percent efficiently in one company," he said, comparing the alliance's erstwhile model to that of Toyota Motor Corp (7203.T).
"By their own admission, there's some ways to go."
(Editing by Ian Geoghegan)