Carlos Ghosn, president and chief executive of Nissan Motor Co., has just announced record six-month earnings of $2.4 billion at the Japanese auto maker. Better yet, after a long drought, Nissan is finally producing hit models like the redesigned Altima sedan, the Micra subcompact, and the back-from-the-dead 350Z sports car. Assistant Managing Editor Joyce Barnathan and Tokyo auto correspondent Chester Dawson spoke to Ghosn recently about Nissan's turnaround, its lessons for Japan, and the year ahead.
Q: Are other companies in Japan adopting Nissan-style restructuring?
A: I don't think today we can see any evidence in Japan that companies are following the whole process. But I see more examples of specific items [of my reform agenda] being analyzed. For example, in 1999 we sold a lot of noncore assets and equities. Today, cross-shareholdings [by Japanese companies] are being dismantled systematically. Certainly the fact that Nissan (NSANY ) has done it in such a transparent way gives courage to a lot of people who would like to do it but have been hesitating.
Q: Is the pace of reform in Japan glacial, or does it just look that way?
A: It's slow, it's very pragmatic. One would expect a quicker kind of resolution. But I would say it's not a surprise. The Japanese people are usually very prudent, even when they are convinced change is necessary. They want to make sure that the appropriate steps have been taken--that [they're] not too much but enough to address the issue.
Q: Why can't Japan break out of its deflationary spiral?
A: When you don't have a clear vision of the future, there's not an incentive to consume or to invest. Until the public sees a clear--or clearer--vision for the future, I don't think what you're seeing today is going to drastically change, frankly.
Q: What kind of vision does this require?
A: Look at the last Congress of the Chinese Communist Party, which had a very simple vision: multiply by four the national income in 20 years. Period. They set the target. How are they going to do it? That's another story. But at least they are sharing with everybody in the country where they should be in 20 years. That's very motivating.
Q: What about the Japanese?
A: The Japanese have done this in the past. And they can more than do it. Why? Because you have this capacity that when people like the vision, they're going to do better. When it comes to executing a vision, they're second to none.
Q: But is the country willing to accept the pain of reform?
A: If you show the pain but don't show the vision, you're going to get what you get from anybody. In the case of Nissan 180 [Nissan's latest restructuring plan], the vision is 1 million more cars sold, top level of profitability in the industry, and no debt. When people see this, they say: `Yeah, I'm ready to fight for this.' If you eliminate the benefit, why will people want to work 14 hours a day?
Q: What's your outlook for the U.S. car market in 2003?
A: Our most probable scenario for next year is that the market will be down compared with 2002. In 2002, [the industry] sold around 17 million units. Our most probable scenario [for 2003] is between 16 million and 16.5 million. In part, the market this year has been inflated by the very aggressive level of incentives that, in my opinion, won't be sustainable.
Q: What if the U.S. faces deflation?
A: I don't see a heavy decline in the [auto] market because of stories about the U.S. and deflation. To face deflation, you have to have people accepting it and not reacting to it. I don't think the different actors in the economy of the U.S. are ready to accept deflation.
Q: How big of an opportunity is China?
A: Last year, we sold less than 40,000 cars [in China]. This year, our forecast for the moment is about 80,000. And we're positing a target in 2006 of 220,000 cars--without counting the buses, trucks, and light-duty trucks. And then in 2010: 450,000 cars.
Q: What do you make of the corporate governance crisis in the U.S.?
A: It's a kind of wake-up call for everybody about the necessity of transparency. If your question is: `Will the U.S. economy overcome this?' then there is no doubt about it. I don't think it's going to be a long-term concern. It will be dealt with--if not now, then in the next six months.
Q: What has been the toughest part of your job at Nissan?
A: In the beginning, the toughest part was raising motivation when you have very tough things to do. Now, it's to avoid complacency.