Nissan Weighs Joining Ford-Oracle Venture to Curb Costs

Strategic Insights -

Nissan's Chief Operating Officer, Carlos Ghosn, has announced that the company is reviewing a proposal to join a joint venture with Oracle and Ford Motor Company to reduce costs through e-commerce. The venture aims to save hundreds of millions of dollars by allowing manufacturers to pool purchasing on the internet. If Nissan decides to join, its partner Renault, which has a significant supply base, is likely to participate as well, given their existing partnership. Nissan is seeking a 20% cost reduction from suppliers, with proposals expected to be finalized this month. The company's executive committee has set a goal of moving into the black this year, but Ghosn cautions that achieving this target will be the most challenging.

Key Takeaways:

  • Nissan is reviewing a proposal to join the Ford-Oracle e-commerce venture, which aims to save hundreds of millions of dollars through pooled purchasing on the internet.
  • The venture could generate revenues of $4-5 billion within five years, based on the estimated value of Ford's extended supply chain.
  • Renault, Nissan's partner with a significant supply base, is likely to participate in the venture if Nissan decides to join.
  • Nissan is seeking a 20% cost reduction from suppliers, with proposals expected to be finalized this month.
  • The company's executive committee has set a goal of moving into the black this year, but achieving this target will be the most challenging.
  • Failure to meet this goal would result in the resignation of the entire executive committee.
  • Nissan Diesel is examining expressions of interest in its heavy truck business, in which Nissan Motors holds a 22% stake.
  • Resolution of the capital structure and stabilization of the business at Nissan Diesel could happen "in a matter of weeks".

Statistics:

  • Estimated value of Ford's extended supply chain: $300 billion
  • Projected revenues for the Ford-Oracle joint venture within five years: $4-5 billion
  • 20%: The cost reduction sought by Nissan from suppliers
  • April 1: The deadline for new contracts with suppliers
  • 22%: Nissan Motors' stake in the heavy truck business
  • November: The month in which the Ford-Oracle business-to-business joint venture was unveiled

Sources:

  • The Financial Times