"Everything is lined up…toward consolidation of the industry. But are you going to be able to get the money you need at a reasonable cost?"
Carlos Ghosn, the CEO of both Renault of France and Nissan (NSANY) of Japan, needs little introduction. He is widely seen as one of the most innovative and strategic thinkers in the car business. On Nov. 19, as the heads of GM (GM), Chrysler, and Ford (F) concluded testimony before a U.S. congressional committee considering pleas for a bailout, I talked with Ghosn about rescuing Detroit and the future of the global auto industry.
Do you support a bailout for the Big Three?
A part of the bailout has already been decided—the $25 billion to make the industry more fuel-efficient. It's the right thing to do because the car industry by itself cannot find enough financing to do that alone. We have asked European governments and other governments to do the same thing. So this we support 100%. For the rest of it…we have no opinion.
But you're an industry insider. Wouldn't it be better to have some capacity go away? Jack Welch suggests in this week's BusinessWeek that both GM and Chrysler should declare bankruptcy and reorganize with the support of Washington.
Anything I say is going to be considered as partisan, and justly so, because I'm involved in the industry. Jack Welch is not involved in the industry: He's an outside observer. He can talk about the industry without being accused of being biased. I am in charge of Renault and Nissan.
Would you consider buying Chrysler outright?
No. It's out of the question.
Can you envision any combination with Chrysler?
For any initiative, you're going to need to line up cash; not only cash for buying any assets but cash for working capital and investment. And today it would be fair to say all car manufacturers are preserving their cash, staying on the sidelines until the storm is past. We're still in an economy where credit and financing are hectic and unpredictable. I mean, some people tell you it's getting more normal, the spreads are going down, there's more money available. But frankly, we are very far from normal financing conditions. No matter how big the opportunity and no matter how cheap the assets, I don't think you're going to see anybody taking any initiatives.
What about a combination with Ford or GM?
Everything is lined up today to push toward consolidation of the industry, no doubt about it. But are you going to be able to get the money you need at a reasonable cost to pursue a strategy that would make a lot of sense in the midterm or long term? As long as you cannot answer this question, I don't think anyone is going to move.
Are unions killing the American auto business?
Frankly, I don't think the question is unions. The question is: Do you have the flexibility to operate and be competitive? If a union helps you be flexible, then the union is an asset. If the union forbids or handicaps this flexibility to operate, then you have a problem. We have unions in France and Japan. If you can reach an agreement by which unions help you be flexible and [respond] to the market, in a certain way they become an asset.
What's the outlook for global auto sales?
I see a market low point in 2009 in the U.S. I mean, we're talking about 11.5 million cars next year [below sales in 1983]. So the trend we have seen in October and November probably will continue in December and into 2009. We all are hoping that the new Administration will go for a strong stimulus plan—not something moderate. But in the absence of this, we have to prepare ourselves for a very low market, not just in the U.S. but in Europe. Europe is already in recession. Japan is in recession. Even the emerging markets—Russia, Brazil—are facing some trouble. It looks like China is the only spot where we can still hope for some growth next year.
What must a carmaker do to survive and prosper?
First, you need to [weather] the next two years. That's a basic condition. To get through them, you need to make sure that you have a positive free cash flow. Or to put it another way, avoid burning cash. That's very fundamental. [You must be able to] still generate cash, even with a market as treacherous as the one we'll be facing. There is an end to any crisis, and this one is no exception. There will be an end. And you want to be ready. You want to have innovative products, strong fundamentals, a team that believes in the brand and believes the company will be ready to fight again. I don't think everybody is going to make it through this period of time, but those who survive will have a boulevard in front of them because people will still need to buy cars.
Isn't part of the problem in Detroit management-related, and hasn't there been a failure of imagination by U.S. carmakers?
I don't think so—no. I'm on different boards, and I talk to my fellow CEOs in energy, utilities, commodities, etc. Everybody is facing the financial drought. A lot of people are cutting back investments even though they are in very healthy industries because they are scared they won't find the financing.
What are your plans for an electric car, and tell me about the Nissan Cube. It's being relaunched in Japan today and will go to Europe and the U.S. in '09.
The Cube is a great car. Small, fuel-efficient. We will be addressing a new wave of young customers, particularly in the U.S., with a car like this. We're transforming the Cube into a global car. And we're going to relaunch the Z. With these, we are renewing and giving a new skin, a new engine, and new technology to nameplates of the brand. But the electric car is different. We're going for a breakthrough—something that will get the attention of many people in many countries. In my opinion, it's going to be a game-changer.