The tieup deal between Nissan Motor Co. and Renault SA, which will be officially announced on Saturday, is about to change the face of the world auto industry. The French carmaker has decided to take a controlling stake of 35 percent in Nissan. The money Renault will pay for Nissan shares, estimated at 500 billion yen, will help the Japanese automaker to remove its debt overhang and put its house in order.
With combined production of over 4 million vehicles a year, the Nissan-Renault alliance will create the world's third-largest auto group behind Toyota Motor Corp. and Germany's Volkswagen. The linkup will also give them a global presence in production and sales, with Nissan operating mainly in North America and Asia and Renault in Europe and South America.
The two firms apparently are counting on that complementary production and marketing setup, along with sharply expanded output, to survive the mounting competition in the global car market. But the road ahead looks far from smooth. For one thing, Renault's profit position, its massive investment in Nissan notwithstanding, appears to be anything but strong. There are also an array of cultural differences that could throw a monkey wrench into the two companies' cooperative venture.