By Yoko Kubota And Jason Chow
French car maker Renault SA's international expansion plans are
encountering obstacles with a proposed joint-venture with
Mitsubishi Motors Corp. scrapped and its struggling Russian car
maker, Avtovaz, disclosing another round of layoffs.
Renault, Europe's third largest car maker, has long championed a
growth strategy that relies on partnerships rather than
acquisitions and on investing in emerging markets such as
Russia.
But that two-pronged strategy have been challenged this week.
Mitsubishi said it scrapped a plan to cooperate on producing and
selling sedans, citing cost and currency concerns. The plan was
conceived as a way for the French auto maker to exploit its spare
capacity and for the Japanese manufacturer to expand its product
range in the U.S.
The move, first reported by trade paper Automotive News and
confirmed by Mitsubishi, is a setback for the broad cooperation
plan Renault, its alliance partner Nissan Motor Co., and Mitsubishi
struck in 2013 to reduce development costs.
"We were conducting a feasibility study hoping for a win-win
situation. But it wasn't feasible," said Tetsuji Inoue, a spokesman
for Mitsubishi Motors. Costs and currency-related issues weighed on
the plan, he said.
Partnerships are central to the Renault-Nissan alliance's
strategy. The two car makers aren't formally merged but share
purchasing, manufacturing and management systems.
Under Chief Executive Carlos Ghosn, the alliance partners have
preferred to sign deals with rival car makers to share expertise
and manufacturing capacity as a way to defray high capital costs of
developing new cars. The alliance most notably signed a deal in
2010 with Germany's Daimler AG to cooperate primarily on small cars
and vans.
Among the ideas Renault-Nissan and Mitsubishi were considering
was rebranding one of Renault's larger sedans made at its Busan
plant in South Korea and selling them as Mitsubishi cars in the
U.S. and Canada.
For Renault, Europe's third-largest car maker by volume, the
plan represented a way for the company to introduce its models into
the U.S. market. The car maker currently doesn't sell its cars in
the U.S., the second-largest car market after China.
Mia Nielsen, a spokeswoman for the Renault-Nissan alliance, said
"it is too early" to speak about details on future development
projects and wouldn't confirm that the plan was being abandoned. A
person familiar with the matter said that the project was scrapped
because Renault didn't foresee enough sales volume to make the
joint-venture profitable.
Separately, Russian car maker Avtovaz, which is controlled by
Renault-Nissan, said it plans to cut 1,100 people from its
workforce during a contraction in the Russian economy. Avtovaz,
which is Russia's largest auto manufacturer and makes cars under
the Lada brand, is struggling as falling oil prices, rising
inflation, a sharp downturn in the value of the Russian ruble and
Western economic sanctions have hit the country's economy, sending
automotive demand spiraling down.
Last year, Avtovaz slashed its workforce by 12,000 to a current
level of around 50,000 employees.
Mitsubishi, one of Japan's smaller auto makers, sold 77,643
vehicles in the U.S. last year compared with Nissan's about 1.39
million in sales and the overall market's 16.52 million, according
to researcher Autodata Corp.
The French and Japanese companies also were considering
rebadging a smaller Renault sedan as a Mitsubishi car globally.
That plan also has been scrapped, Mitsubishi's Mr. Inoue said,
though Mitsubishi is still considering how to introduce such a car
into the global market. It hasn't ruled out searching for other
partners.
Write to Yoko Kubota at yoko.kubota@wsj.com and Jason Chow at
jason.chow@wsj.com
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