January 30, 2014 / 5:05 PM / 3 years ago

Renault-Nissan lifts alliance savings goal

The Renault automaker company logo is displayed outside a car dealership in Bordeaux, Southwestern France, March 1,2013.Regis Duvignau

PARIS (Reuters) - Renault (RENA.PA) and alliance partner Nissan (7201.T) raised their joint savings goal on Thursday, vowing to deepen cooperation in vehicle development and production as the race for global scale intensifies among carmakers.

Alliance cooperation will cut costs by at least 4.3 billion euros ($5.8 billion) in 2016, the companies said - an improvement on the 4 billion euro target announced in 2012, when savings amounted to 2.7 billion.

Renault and its 43.4 percent-owned Japanese affiliate are

"focused on improving operational performance", they said in a statement, as Chief Executive Carlos Ghosn presented the new goals at a two-day internal meeting in Amsterdam.

Ghosn also appointed executives to lead efforts to converge manufacturing, research and development and human resources.

Squeezed by the rising costs of emissions regulation at home and tougher competition in emerging markets, where demand is slowing, carmakers are scrambling for economies of scale through mergers, alliances and ad-hoc production deals.

Almost 15 years into their alliance, Renault and Nissan are working steadily to pool more parts, technology and production lines globally.

"The market has been waiting 14 years for notable synergies to materialize," Laura Lembke, a London-based Morgan Stanley analyst, said in a recent note to investors.

"We think the alliance is finally entering the harvesting phase."

Renault's Flins plant, near Paris, will start assembling the Nissan Micra subcompact for Europe in 2016, and a Renault spokesman said on Thursday it planned to raise the annual production target to as many as 132,000 from 82,000. Nissan's board was due to take a decision on the increase next month.

Renault-Nissan lags the likes of Volkswagen (VOWG_p.DE), Hyundai-Kia (005380.KS) and Toyota (7203.T) on platform scale - the number of vehicles assembled from a common architecture. Production began late last year from the alliance's first jointly developed mid-size car platform.

A six-year market slump in Europe has helped to persuade managers at both carmakers to embrace deeper integration.

"Now, when you explain to them that every euro we spend on duplication is a euro VW saves, they get it," a source in the alliance said.

Faster Integration?

Alliance bosses say there are still no plans to upgrade the crossed shareholdings between Renault and Nissan with a full merger or any other adjustment to the current structure - which frustrates some investors because the French carmaker's share price fails to reflect the value of its Nissan stake.

The Renault-Nissan boss has said integration cannot move faster without the kind of friction that has undone previous industry pairings, including Daimler's (DAIGn.DE) ill-fated merger with Chrysler.

Another obstacle is the French government, whose 15 percent stake in Renault is fractionally bigger than Nissan's.

But Ghosn's presentation to 250 alliance executives comes a day after Fiat boss Sergio Marchionne unveiled a bolder plan to merge the Italian company with Chrysler following a successful buy-out deal with its minority shareholder.

"The race has started," Marchionne told Reuters after announcing the deal to take full control of the U.S. carmaker earlier this month. "The heat is now on everybody else to try to join the bandwagon."

Renault and Nissan will "study increased convergence" in several areas, the alliance said on Thursday, under the project leaders, who may end up heading the new joint operations.

Alliance platforms chief Tsuyoshi Yamaguchi will lead the research and development convergence team. Nissan production boss Shouhei Kimura will do the same for manufacturing, while Renault's Marie-Francoise Damesin draws up plans to pool human resources functions.

Besides their new mid-size vehicle architecture, Renault and Nissan have stepped up cooperation in low-cost vehicles.

A range of no-frills cars is already in joint development in India, spawning models for Renault and Nissan's Datsun brand. The carmakers are also taking joint control of Russia's AvtoVAZ this year and producing their own vehicles at its Togliatti plant, based on Renault's Logan sedan.

Editing by James Regan, Tom Pfeiffer and David Evans

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