Online Extra: An Interview with Carlos Ghosn
No auto industry executive commands the kind of attention that Renault-Nissan CEO Carlos Ghosn gets. Even though leaders at top-rated carmakers such as Toyota (TM ), Honda (HMC ), and BMW can also boast great results, it is Ghosn that industry watchers talk about most.
It's easy to see why. He became chief executive of nearly bankrupt Nissan (NSANY ) in 2001 and turned it into the world's most profitable carmaker in five years. Ghosn is one of the few auto industry execs to make an alliance work. His combined company sells almost 6 million vehicles a year, making it the fourth largest car company behind General Motors (GM ), Toyota, and Ford (F ) with almost 10% of the world's car market. Even though sales at Renault and Nissan are currently slumping, both companies remain profitable and Ghosn has a plan to turn each carmaker around.
Unlike many top managers, Ghosn sets goals and hits them. He says Renault will boost sales by 800,000 units to 2.5 million by 2009. He also vows to double its operating margins to 6%. Likewise, he says Nissan will break out of its malaise, maintain the best margins in the industry at more than 8%, and move sales from 3.6 million cars to 4.2 million by the end of next year.
If that's not bold enough, Ghosn is in the midst of talks with General Motors about pulling his auto duo into an equity tie-up with GM. If a deal doesn't pan out, Ghosn may even be interested in talking to Ford. The struggling U.S. carmaker's chairman, William C. Ford Jr., has reportedly called him about a possible alliance.
With the early October deadline for talks about a GM deal looming, BusinessWeek Detroit bureau chief David Welch sat down with Ghosn in his office at Renault's headquarters in Boulogne-Billancourt outside Paris. Here's what the industry's rock star had to say:
You're talking with GM about an alliance and Ford has called. Why do you need an alliance? Are you trying to build a Toyota-fighter?
I don't think you can talk about need. From the Renault-Nissan side, we're not talking about need. This alliance can continue to perform as it is. Renault has a very clear announced strategy with very clear operating commitments. We've been extremely transparent about what we have to do. Same thing with Nissan. As the CEO of a company, your duty is to always look for opportunities for growth and expansion. It's coming from an observation that you guys made, and that I share, that the alliance is the only cooperation in the industry that is working very well and bringing results, against all the odds.
O.K., so why do you want to expand the alliance?
We have something that is working at a time when the industry is struggling. Why not expand it? The question then is to whom? Why not expand it to a big market where we are not significantly based? Naturally you would say that a North American partner would be a remarkable, complementary fit for the alliance. The others don't make so much sense. Then all of a sudden, you have an outside element, which is a major shareholder of GM, taking the initiative to say, "Why aren't you guys focusing on it officially?"
Based on how things have gone, what will happen?
It's unpredictable. The synergies have to be substantial. On top of this, we have to have the same appetite from both sides. That's a question. Do we really have the same appetite? We have to wait to see what comes of the talks. The conclusion of the talks can't be anything in between yes or no.
In other words, you wouldn't be satisfied with small joint ventures with GM. It's all or nothing with you on this. You either want an equity tie-up or nothing, right?
It's difficult to imagine a joint venture or other things if you keep your alliance open. If you want to expand the alliance, you're not going to get into smaller ventures with many other car manufacturers. It's very unlikely that this will get down to anything other than a yes or no.
The word in Detroit is that GM Chairman and CEO Rick Wagoner isn't all that enthusiastic about this.
If we come to that conclusion at the end, then we were wasting our time.
Your management style and the way you run the alliance worked well for Nissan. I'm not saying you'll take Rick Wagoner's job, but is your style of management something you think would help GM?
If you decide to go in an alliance, you cannot sit down and be indifferent to the performance of your partner. You can't. Renault did not sit down and look at the performance of Nissan indifferently or the other way around. Why? Because the value of Renault is tied to the value of Nissan and vice-versa. You have to create a community of interest. That's why for me the exchange of shares is not so much a condition as it is a fundamental point of creating a community of interest.
Why would you want to get involved with GM given its problems?
We think the synergies are going to be big. We saw how big it was between Renault and Nissan. Everything is going to be really big with General Motors.
If you don't cut a deal with GM, will you look to Ford next?
For us, we are concentrating on the present talks from the principle that the alliance is a good thing. We think a North American partner would make sense with the suspicion that there are synergies.
Would Ford be a better match? Or would you want to buy some of its luxury brands like Jaguar or Land Rover?
Before taking that seriously, we'd have to sit down and really look at it.
Given the friction between GM management and Kirk Kerkorian's camp, would you have been better off approaching GM about an alliance without Kerkorian being involved?
It's difficult for me to make an interpretation on that. The question is, are they motivated or not?
Looking at the problems now facing Renault and Nissan, some are saying that maybe Ghosn is a turnaround specialist, but not necessarily an operating manager. How do you respond to that criticism?
On the Renault side, we are at the low point of our product cycle. At Nissan, we're at the very low point of the product cycle. If you're at the low point and still profitable, then you're in good shape. The product drought at Nissan will come to an end soon. We're out of the desert. And it won't happen again. For Renault, we still have a few months ahead of us in the desert.
Why haven't you been able to fix Nissan's quality problems?
In 2004 and 2005, Nissan made significant progress in J.D. Power's Initial Quality Survey. We'll do better. You'd like to move quicker, but sometime you have to change specs or designs to do it. That takes time.
You have a Jesuit background and your book says you prize learning. How do you teach your managers?
I think that the best training a top manager can be engaged in is management by example. I want to make sure there is no discrepancy between what we say and what we do. If you preach accountability and then promote somebody with bad results, it doesn't work. I personally believe the best training is management by example. Don't believe what I say. Believe what I do.
Click here to read David Welch's feature "Just How Good Is Ghosn?" in the Sept. 25, 2006, issue of BusinessWeek