Renault/Nissan/Mitsubishi Alliance Rolls Out.
The announcement, in 2016, that Nissan Motor company was taking control of Mitsubishi Motors Corporation, and that the company was being added to the global Renault/Nissan alliance, was possibly the most important and positive development in a year that was otherwise characterized by scandals relating to fuel consumption and emission manipulation, faulty airbags, accusations of collusion, and other unsavory developments in the global automotive industry. The important ramifications of the expanded alliance, which had already achieved synergies of $US 180 billion in 2016, and enjoyed a positive and growing working relationship with Daimler AG, included the creation of a potentially world-leading volume producing group, and the stabilization of a manufacturer that has experienced a somewhat turbulent history while producing a number of highly successful and well-respected products.
The takeover was, in itself, somewhat unusual and had been triggered by an unhappy set of circumstances, in that fuel economy data supplied to Japanese authorities by MMC in respect of its mini vehicles, sold under both Mitsubishi and Nissan branding, had been overstated. The acquisition required just a $US 2,2 billion 34% equity stake purchase, because of MMC’s highly fragmented former ownership, with the largest single shareholder having been Mitsubishi Heavy Industries Limited with only 12,63% of the total equity. Industry observers were generally welcoming of the takeover, in view of Mitsubishi’s history which included past partnerships with Chrysler, the erstwhile DaimlerChrysler, PSA Peugeot-Citroen, Volvo, Nissan, and numerous other Asian manufacturers.
While the new Renault/Nissan/Mitsubishi grouping promised combined total sales volumes in excess of nine million units, it was clear that work would be necessary to eliminate overlaps and optimize its future performance. The first evidence that this work was well in hand recently emerged, in the form of “Alliance 2022”, a six-year plan announced by charismatic chairman and chief executive officer, Carlos Ghosn. Notably, the most striking element of this plan will be the achievement of 14 million unit group annual sales by its conclusion, which should be enough to ensure that Renault/Nissan/Mitsubishi will lead the global market. However, the plan consists of numerous items of detail, which will be material to the achievement of the overall objective. These include:
- Adoption of an official “Alliance” logo and on-line presence.
- Annual cross-group synergies of € 10 billion by 2022.
- More than 9 million group vehicles to share four common product platforms.
- Three-quarters of alliance volumes to share common powertrains.
- Cross-group development of electrification, connectivity and autonomous technologies.
- 12 pure electric (zero-emission) models to be launched, utilizing common EV platforms and components.
- 40 vehicles to be launched using progressively-increasing levels of autonomous drive technology.
- The alliance to become an operator of robo-vehicle ride-hailing services.
It is clear from the foregoing that “the Alliance” (now, apparently its official name) has firmly hitched its star to progressive concepts like electrification, autonomy and alternative vehicle ownership as important components of its growth strategy. While some of these may only play out over an extended period, there is plenty of evidence that shorter-term planning elements are firmly in place. These include moving Mitsubishi Motors towards deeper localization, joint plant utilization, the use of common vehicle platforms, joint involvement in light commercial vehicle aftersales, and an expanded presence in mature and emerging markets. Progress has already been made with the integration of engineering, manufacturing engineering, supply-chain, purchasing and human resources areas. Mitsubishi will also gain access to Renault/Nissan’s Common Module Facility architectures, which currently underpin the Nissan Rogue, Qashqai, and X-Trail, the Renault Espace, Kadjar, Megane and Kwid and the Datsun Go, by 2020.
The Alliance’s plans for electric and autonomous vehicle roll-outs have been published, and are worth noting. They include common scalable EV platforms for multiple segments by 2020, a new family of EV motors and batteries from 2020, 12 new pure electric vehicles by 2022, autonomous vehicles with full human monitoring for highway applications in 2018, autonomous vehicles with full human monitoring for city applications in 2020, autonomous vehicles with partial human monitoring for highway applications in 2020, and fully autonomous vehicles, without any human interventions, for all applications, by 2022. Some of the EV technology targets include a more than 600 km operating range capability by 2022, a 30% decrease in battery cost from 2016 to 2022, 15 minutes charging time for 230 km range by 2022, optimized battery flat packaging for less interior space intrusion, and adoption of Mitsubishi’s new plug-in hybrid technology across all Alliance nameplates by 2022.
The Renault/Nissan alliance has presented as a highly successful model for co-operation between previously independent manufacturers, as it has assisted both constituents through tricky periods of less-than-satisfactory profitability by the realization of economies of scale and intelligent rationalisation. Despite some initial observer misgivings about cultural differences, both manufacturers have expanded their global footprints and market coverage, particularly in the area of affordable entry-level products. The extent of the alliance’s successful co-operation with Daimler and Dong Feng has also been an eye-opener. The arrangement between Renault-Nissan and Daimler includes a 3,1% cross-shareholding, but there have not been indications, up to now, that any further corporate consolidation involving Daimler is on the agenda. However, with the Renault/Nissan/Mitsubishi Alliance now a serious contender for global automotive market leadership, nothing can be ruled out.
Ford and Mahindra.
If there is one certainty in the global motor industry, it is that nothing ever stays the same. Take the Ford Motor Company for instance. From inception, the company was identified by its famous “Blue Oval” emblem. Even during the lengthy period when some Ford products were sold variously as Taunus, Thames, Fordson, or Mercury, there was never any doubt about their parentage, and the situation became even clearer when an unambiguous single-brand strategy was adopted in the 1970’s. In 1979, however, Ford bought a stake in Japanese manufacturer Toyo Kogyo, and much confusion resulted when only “badge engineering” separated some almost identical Ford and Mazda equivalent models. The shareholding in Mazda peaked at 33,4% in 1996, but, from 2008 it was progressively scaled down before being completely sold off in September, 2015.There was also the more recent period when Volvo, Land Rover, Jaguar and Aston Martin joined the Ford Premier Auto Group family, and Jaguars shared a common platform with Ford Mondeos. This all unwound, however, from 2007, when Alan Mulally moved in from Boeing to revitalize the company with his “One Ford” strategy, and this led to the sale of the four offshore PAG brands, leaving Lincoln as the only alternative nameplate.
In September, we read that Ford had entered a three-year strategic alliance with Indian manufacturer Mahindra and Mahindra Limited. Somewhat surprisingly, the report also stated that the two companies had, in 2005, ended a previous partnership which had commenced in the 1990’s, and included cross-shareholdings. The article suggested that Ford’s new Chief Executive, Jim Hackett, who took over in May 2017, had conducted an extensive audit of the company’s strategies, and was embarking on a new direction. This revived relationship with Mahindra is expected to yield access to lower cost electric vehicle designs and local Indian component suppliers for Ford, while Mahindra may gain possible access to Ford’s global distribution network, and additional production capacity in Ford’s Indian operations.
Despite producing important and successful export products such as the Figo, Ikon and EcoSport in India, Ford reportedly enjoys less than 3% share in the local market, which is reported as being one of the fastest growing in the world. The partnership with Mahindra could be pivotal in improving Ford’s sales performance in India, but we were somewhat surprised by its apparently short-term nature. Ford currently conducts manufacturing operations in Chennai, Tamil Nadu and Sanand, Gugarat, and is planning to establish a global engineering centre in Chennai. These all suggest a high level of commitment to a continuing presence on the Sub-Continent. However, Ford’s recent uncoupling of its previously close relationship with Mazda may present some warning signals to Mahindra that the American company is not over-enthusiastic about long-term alliances. This seems counter-intuitive, given recent developments at Renault/Nissan/Mitsubishi (see previous article), and Toyota’s growing involvement with other Japanese manufacturers. We believe that there is considerable potential for Indian manufacturers to be drawn into firm global alliances, and will be watching this story closely as it develops.
Interestingly, Ford has also recently commenced EcoSport production in Craiova, Romania, reportedly to keep pace with demand from Europe’s rapidly-growing compact SUV market sector. This was good news for Romania, where Ford has invested more than € 1 billion since taking over the Craiova facility in 2008, and now employs 3 900 people. In addition to Continental European markets, EcoSports built in Romania will be supplied to the United Kingdom, New Caledonia, Turkmenistan and South Africa.
Truck Industry Developments.
Last month we reported on the introduction of Paccar’s in-house branded 12-speed heavy duty automated transmission, developed in collaboration with, and manufactured by, transmission specialist Eaton. Subsequently, we have read about a similar joint venture between Eaton and diesel engine specialist manufacturer Cummins, resulting in the launch of the Endurant 12-speed automated transmission, which appears to share many of the specification features we listed when describing the Paccar-branded unit. However, the integrated electronic communication system, in this case, will pair the transmission with the Cummins X15 Efficiency Series engines rather than Paccar’s MX-11 and MX-13 power units. This combination should appeal particularly to operators with a preference for larger displacement engines in linehaul operations.
The report stated that Eaton and Cummins have established a 50/50 joint venture entitled Eaton Cummins Automated Transmission Technologies, which will produce medium- and heavy-duty automated transmissions, and market these products to original equipment customers in North America. As we noted in last month’s article, the American trucking industry has increasingly shifted from its previous preference for outsourced driveline aggregates from specialist suppliers, to vehicles featuring “vertically integrated” in-house driveline specifications, mainly through the influence of European-led groupings such as Daimler and Volvo. These newly-announced moves by Eaton to associate its products more closely with truckmaker Paccar and engine manufacturer Cummins clearly present as a response to this evolving situation.
Alongside these continuing advances in conventional vehicle technologies, the truck industry is also moving resolutely into the world of electric traction. Following extensive real-world trials of the basic design in Portugal and Germany since 2014, Daimler Trucks subsidiary Mitsubishi Fuso Truck and Bus Corporation (now quite separate from Mitsubishi Motors Corporation) has launched the Fuso eCanter, claimed to be the world’s first series production all-electric light-duty truck, on to the US, European and Japanese markets. Aimed at inner-city distribution applications, the eCanter has a payload capability of up to three and a half tons, an operating range of 100 km, and is equipped with six high voltage 13,8 kWh lithium ion battery packs. Early retail customers for the eCanter include UPS in North America, and the Seven Eleven Company in Japan.
Some readers are sure to remember when Mack trucks were extremely popular in South Africa. With their distinctive bulldog bonnet mascots, Macks had been something of a novelty here up till 1973, but subsequently they were to become very successful players in the local market, primarily as extra heavy duty prime movers. Mack’s most important feature, at that time, was a combination of their Maxidyne high torque-rise diesel engines and 5 or 6-speed triple-countershaft transmissions, while most American competitors specified 9, 13 or 15-speed multispeed gearboxes. Somewhat surprisingly (to the competition), the Mack recipe, with its considerably reduced workload demand on drivers, delivered class-leading performance and fuel economy, and was soon established as the favoured choice in many prominent fleets.
However, with the compulsory introduction of Atlantis Diesel Engine fitment to heavy trucks in South Africa from 1982 to the mid-1990’s, the punitive duties that were incurred by non-compliant vehicles argued against Mack’s continued use of its own power units, thereby cancelling out its technical advantage. In due course, Mack departed from the local market. In 1979, European manufacturer Renault initiated a progressive takeover of Mack Trucks, and completed the process, under the RVI banner, in 1990. Mack subsequently passed, along with Renault’s other trucking assets, into Volvo ownership in 2001. The Mack brand has prevailed, and continues today as a fully-fledged member of the Volvo Group, being one of the group’s two participating brands in the North American truck market. The recent North American range has carried imaginative model names, such as “Pinnacle” (on-highway hauler), “Granite” (vocational applications), “TerraPro” (cabover/low-entry refuse/vocational), and “Titan” (heavy haulage), while power was provided by 11, 13 and 16-litre Volvo Group engines, designated MP7, MP8 and MP10 respectively in their Mack identities. Mack also builds and markets trucks in Australia, but the brand has never returned in any significant numbers to the South African market.
Late last year, Mack introduced its new Anthem highway truck model to its home market. Notable features include an all-new exterior design with optimised aerodynamics, new driving and sleeper arrangements, the trucking industry’s first flat-bottomed steering wheel, 5-inch full-colour navigation screen, 7-inch touchscreen information and entertainment display, seats developed in partnership with Sears Seating, stand-up/walk-through cab/sleeper environment, 27 cubic feet in-cab storage facilities, and LED-based exterior and interior lighting. The technical specification is made up of 11-litre MP7 or 13-litre MP8 diesels covering the power/torque spectrum up to 505 hp and 1 860 lb.ft., coupled to 12, 13 or 14-speed mDRIVE automated transmissions, and Mack’s in-house branded drive axles. The latest design enhancements to Mack’s Volvo Group-derived engines include two-piece valve covers, shimless rockers, a low-pressure fuel system, enhanced aftertreatment emissions dosing, and a double-walled exhaust recycling sensor, while a special turbo-compound version of the MP8-TC SuperEconodyne engine benefits from having 50 additional horsepower returned to its crankshaft from the exhaust system through a system of gearing.
Readers will note that the days of monstrous power increases and giant forward leaps in technical specifications have gone from the mainstream trucking industry. Now, it has become increasingly necessary to dig deep into the electronic management and communication elements of truck design to find the driver and operator aids that can offer measureable improvements in performance and operating economy. It can truly be said that the devil is increasingly in the detail, and it seems likely that this situation will prevail until the electronic traction systems mentioned previously start to invade the long-haul transportation arena in substantial numbers.
The announcement on September 6th, 2016, that Volkswagen Truck and Bus had agreed to acquire a 16,6% stake in American truck and engine manufacturer Navistar International Corporation, at a cost of approximately $US 256 million, aroused considerable worldwide interest. Clearly intended as a move by VW to increase its global penetration through a significant participation in the important North American heavy duty truck market, it raised many questions about the future direction of the American company, which has endured more than its fair share of difficulties in recent years, and had notably withdrawn from its previously successful participation in the South African trucking arena. The initial response from observers to VW’s buy-in was positive, in that the global giant’s patronage would provide Navistar with additional financial security, and carry forward the American manufacturer’s 11 and 13-litre diesel engine manufacturing collaboration with VW’s MAN subsidiary, which dates back to 2008.
Recently, Navistar announced that it was to end production of its own 9/10-litre diesels at its Melrose Park, Illinois facility, during 2018. This would leave buyers of International’s medium-duty range with only a choice of 6, 7- or 9-litre Cummins engines for fitment to their new trucks. However, in view of our previous comments about the increased acceptance of in-house major driveline components by American operators, we are left wondering about some possible future arrangement whereby International trucks may be offered with other engines from within the Volkswagen family. It is still very early days in the VW/Navistar relationship, and we are sure to hear of many new ramifications as the years roll out. In our initial assessment of the buy-in, we doubted that the initial 16,6% shareholding would provide VW with the desired level of leverage over such a potentially important asset, and expressed the view that this ownership ratio may eventually be expanded.