News & Views

Automotive Industry in Focus:
Renault-Nissan-Mitsubishi Alliance. Is it Sustainable?

Published: June 9, 2020

When announcing the loss of up to 15,000 jobs worldwide as a result of the COVID-19 pandemic, the Interim CEO of the Renault-Nissan-Mitsubishi Alliance (RNM Alliance), Clotilde Delbos, said that the RNM Alliance must change its mindsets “from one of size, scale and being ‘on top of the world’, to that of being sustainable, profitable and more of its natural size.” It was also announced that the previous strategic capacity of 5 million cars per annum has been slashed to 3.3 million cars, with a tighter focus on small, electric, autonomous cars and vans.

This is an interesting statement from so many angles.

  1. Its timing on the back of COVID-19 global recession.
  2. The RNM Alliance’s Corporate Social Responsibility Statement for the last 5 years or more, has stated that sustainability is already part of the design and intention.
  3. The historical shenanigans around Governance of the RNM Alliance.

This strategic partnership (as it is called) between Renault, Nissan and Mitsubishi is, in many ways unique – not so much in the elements that make up its form (Shareholders, Stakeholders, Partnerships and Joint Ventures), but more to do with the blend of business relationships relative to its industry and global footprint. Are these ambitions of Sustainability and Profitability achievable, or just hot air?

Our sustainable assessment is this: The genuine, long-term sustainability of the RNM Alliance is most likely at risk – not because of its trading outlook, challenge and strategy, but because of its Governance mindsets; power, control and ego getting in the way of true partnership. The seeds of corruption lie within!

How can we make such a desktop assessment of a company’s sustainability risk?

There are four primary entities that are inter-dependent in any business: the people who work there, the customers, the trading business unit (in law) and the ownership/governance of the business. These four entities must interface together in a natural and authentic way for sustainability to have potential. When this happens well, the entity has the ‘right relationship’ with all things. At this point, integrity becomes the sea upon which a sustainable boat can remain afloat into the long-term. This level of integrity has to come from the very top, rooted in a culture of trust, openness, transparency.

When anyone experienced in business reads the RNM Alliance back-story, we will know that people will put up with a lot and often comply because complaining and whistleblowing will cause them to lose their job. In the end, people run businesses to the best of their attitudes and abilities, and the leaders of these people are the glue that keep collective progress together. There is nothing to suggest that the people in the RNM Alliance cannot evolve beyond their burning fossil-fuel platform in a sustainable way. Keeping up with global leaders VW Group, famous for the emissions scandal, cannot be the way; finding your own raison d’etre and using the plumb-line of integrity to measure progress is the sustainable way.

Regarding the customer and trade, each of the RNM Alliance brands have brought a loyal base with them, including nearly 800,000 annual electric car sales globally through Nissan. Much of the short-term focus in terms of the benefit of this alliance is from synergy and collaboration to minimise duplicate investment, help each other to reduce costs and maximise sales in different geographies and parts of the market. In any market there is always a chance to lose and fall away, but each brand is moving with the times and ‘on paper’ look like they can shift quickly enough where everyone in the industry is grappling with fossil fuel engine demise as electric and CO2 measures arrive. We also need to factor in one of the last ‘off-the-cuff’ remarks by ex-CEO, Carlos Ghosn that “Nissan will go out of business within 2–3 years of 2019”. He never said why. There may be un-crossable chasms ahead, but any professional management team just need to keep going and navigate the road ahead with their flag of brand integrity and trading sustainability.

Now we move to the business units within the RNM Alliance, where the legal structure remains as the alliance of three separate market-facing brands. Industry analysts point to the lack of overlap of these brands as being the core of the problem. This belies the typical myopic thinking of the financial investment world that tend to see most short-term profits coming from consolidating and cutting costs – which is almost always a one-off exercise in self-interest and often in the direction of long-term demise well after the perpetrators have retired. So, the RNM Alliance relies on each brand standing on its own two feet in different geographies and markets, sharing the costs, investments and best practices of the changing times with each other. The CEO Clotilde Delbos, states that the Alliance is not a goal in itself. Let us just assume for now that each brand will stand or fall and find its own place, relevance, profitability and trading sustainability with the shared benefit of the alliance being ‘an advantage to them all’.

Now up to this point it all makes sense, the people, the customers and the trading businesses will continue to find ways to provide affordable, mass market automobiles aligned to the times. So who/what could break up this alliance, or not provide oversight to assure its greatest synergistic potential? The short answer is ‘the controlling nature, power and ego of man’.

Mutual self-Interest at a governance level is the cause of the risk to their whole future

When you read the facts at this level of the reality, there is an imbalance in ownership, voting relationships and comparative profitability. The larger minorities are held as a Renault investment in Nissan (43%) along with the voting rights, but the Renault trading business is the least profitable. Whereas the smaller holdings held by Nissan in Renault (15%) are without voting rights, yet the Nissan brand is currently much more profitable. There is a back-story here: Renault saved Nissan from the brink 20 years earlier.

The reality is that the RNM Alliance has, so far, moved only one step along the scale in the direction of sustainable governance; from ‘corporate self-interest’ to ‘mutual self-interest’. Despite the label used of ‘strategic partnership’, it has not yet arrived at ‘true partnership’ and it is partnership culture that is needed for genuine long-term sustainability. Nothing less. In a partnership, unity decision-making is needed, not majority/minority decision making. In a true partnership wisdom prevails over control and power. In partnership, the size of the financial stake does not remain coupled to the voting-rights. In this evolving ‘dogs-dinner’ of corporate governance they have created a 50:50 joint-venture holding company in the Netherlands in which both the larger businesses are 50% shareholders, but where the French President, Emanuel Macron, wants to unilaterally appoint the Chairman! The controlling behaviour has not gone away. In the creation of this JV holding company, the unequal mutual investment differentials at the trading business level have not been adjusted. They have then gone on to create a central global alliance operating board and management team. The French government has tried to create the conditions for an all-out merger of Nissan into an overall controlling Renault entity. Consequently, the Nissan management on their part started to invest time and money in being able to ‘fly solo’ once more. What does this say about the trust at the core the of business? The role of governance is, in part, to bring about unity and to create unity of purpose. That requires wisdom.

One foot on the accelerator and one foot on the brake

The ’unresolved knot’ that will hinder the ability of the trading management teams to realise the sustainable potential of the business is that the governance structure and human behaviours of governance are still of the level and nature of ‘mutual self-interest’. Each party states that they cannot survive on their own and must be part of the Alliance to survive. What most will not understand or be able to see is that a relationship based in ‘mutual self-interest’ will fail in the level of governance needed for long term sustainability and is destined for long-term conflict which will end up hampering the trading effort. It will be like having one foot on the accelerator and one foot on the brake.

The most grown up governance model currently is a trust-owned, sustainable business partnership. This governance solution would give the mutual self-interested RNM Alliance the chance to move to a truly sustainable partnership model. True partnership needs ‘enlightened people’ to run it and not ‘control and ego’. For the benefit of this global society, for the families whose livelihoods are wrapped up in working there and for each of the individual’s health, fulfilment and happiness, I hope that wisdom will find a way to transform mutually self-interested governance into custodianship over a true partnership. Let’s watch and see if wisdom will prevail?!

If you are interested in finding out how Enrichyou can assess and help your business evolve towards a sustainable governance model, please call us on +44 (0)1733 645001 or click [Contact Us].



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