Louis Schweitzer (Renault): “In a strategic partnership you don’t progress unless both companies win”

Leaders League. In 1999 you orchestrated the tie up between Renault and Nissan. Why did you choose this particular Japanese company?

Louis Schweitzer. Part of the reason why we were able to close this deal was the difficult financial situation Nissan were in at the time. Renault were well established in Europe, but suffered from a lack of presence on the international scene in two key markets, Asia and the US. Given the means at our disposal, we would not have been able to penetrate these markets on our own. And as a direct partnership with an American company was impossible, I therefore sent a team to evaluate the feasibility of a strategic partnership with a Korean or Japanese manufacturer already present in the US. Over time our search came to focus on two Japanese companies, Mitsubishi and Nissan. Of the two, Nissan had the advantage of being better positioned in the American market. They were already in discussions with Ford and Daimler, but in the end these companies abandoned their plans to partner Nissan, judging the deal too risky. Renault became the only candidate and a deal was struck in the two weeks that followed.

Leaders League. Why did you choose a strategic partnership rather than a merger or an acquisition?
L. S. For a number of reasons. We wouldn’t have had the resources to buy a company the size of Nissan, which isn’t a candidate for this type of deal anyway. There were also organizational obstacles. From my experience, notably on the Volvo deal, a successful merger requires a great deal of proximity between the two companies. With Nissan it was, to my mind, essential to put together a framework where both partners could work effectively together while preserving their own personality and a measure of autonomy. Take the merger of Daimler and Chrysler: it has been a failure because the new company has not succeeded in uniting all their staff under the one banner. A significant number of them still identify, first and foremost, with their firm of origin. Even fusions between French companies are fraught with difficulties. 

The Peugeot and Citroën merger took decades to become fully effective. With a Japanese auto company whose head office is 10,000 kilometers from France, not to mention the different language and culture, a merger would have been doomed to failure. 

Leaders League. To what do you attribute the success of this strategic partnership?

L. S. The partnership is a success because the two firms coexist. Staff in each company therefore take care of their respective company’s interests. In a merger, one party is often sacrificed to fit the needs of the greater whole, while with a strategic partnership this never happens. You don’t progress unless both companies win. In this scenario questions of loyalty to a company are fundamental and serve the interests of the partnership. With a merger, on the contrary, company loyalty often works against the deal.

Leaders League. The two car makers are still cross-owned today, with Renault having 43.4% of Nissan and the latter owning a 15% stake in the French company, but without voting rights. Given the current strong economic position of Nissan, shouldn’t the particulars of this partnership be re-examined?

L. S. The answer is no! What you need to keep in mind is that at the time the deal was concluded Nissan were a much bigger com- pany than Renault, and were present in markets more profitable than those of Europe. The fact that Nissan had for some months a stock market value below that of Renault was only due to managerial and other contextual difficulties. What’s more, the fact that Nissan don’t have voting rights is only because of French legislation on treasury shares. In the initial agreement it was stipulated that Nissan would become a shareholder in Renault so that they would have an interest in the success of the French firm. Although Nissan don’t have voting rights, they have two members on the board of Renault. In practice, therefore, there is some reciprocity at directorial level, as further evidenced by the presence of a common board of management. 

Translated by Simon McGeady from the French article of Mathieu Marcinkiewicz