The Wall Street Journal-20080128-Boss Talk- Ghosn Maps Path Through Slump- Nissan- Renault CEO Bets on Tie-Ups- Cheap Cars and Electric Vehicles

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Boss Talk: Ghosn Maps Path Through Slump; Nissan, Renault CEO Bets on Tie-Ups, Cheap Cars and Electric Vehicles

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Nearly a decade ago, Carlos Ghosn rose to fame for rescuing Nissan Motor Co. from near collapse and turning it into one of the world's most profitable auto makers.

Today, Mr. Ghosn, 54 years old, now chief executive of both Nissan and Renault SA, sees the global auto industry in need of a similar reversal of fortune. Strained by a weak U.S. market, rapid expansion in emerging markets and a shift in demand from gas guzzlers to ultra- low cost cars and fuel-sipping green vehicles, the world's auto makers are at a crossroads.

In April, Nissan reported its first full-year drop in net profit in seven years and pushed back a key long-term sales goal. At Renault, Mr. Ghosn may have a tough time with his goal to boost global sales volumes by 30% by 2009.

But Mr. Ghosn says he is adapting. Last week, Renault and Nissan announced plans to develop mass-market electric vehicles. Nissan this month also said it would team with Chrysler LLC to produce a compact that the U.S. company would sell in South America.

Born in Brazil to Lebanese parents and fluent in six languages, Mr. Ghosn divides his time between Tokyo and Paris. He stopped at The Wall Street Journal in New York recently to share his thoughts on the auto industry. Excerpts:

WSJ: What's your view of the U.S. market?

Mr. Ghosn: We've been in a slump in the U.S. now for four years. It's not only in number but also in segment. You are moving from large pickup trucks, vans, luxury products to smaller cars. You know that many car manufacturers don't make any money on small cars. They make money on the larger cars, so when the market moves this way it's a double impact in terms of profit on most of the car manufacturers, if not all of them.

WSJ: Who is hurting the most in this market?

Mr. Ghosn: Obviously, the Big Three. So how much more are they going to be able to sustain this kind of pressure and what's going to happen? That's a very important question for all the industry.

WSJ: Can all the auto makers survive in such a difficult environment?

Mr. Ghosn: No.

WSJ: So, what will the U.S. automobile industry look like in three years?

Mr. Ghosn: The market share of the Big Three, which is shrinking, is going to continue to shrink. Look at [Tata Motors Ltd. of India] now buying Jaguar and Land Rover. You may have European car manufacturers making proposals of taking a bit or a brand or a piece here or there.

WSJ: When it's all over, is there a native U.S. auto industry?

Mr. Ghosn: Frankly, I don't know. I can tell you it's going to be very different from today. But whether there is going to be one left or two left or none left I don't know.

WSJ: What about the non-U.S. auto market?

Mr. Ghosn: It's booming if you go out of Japan, Western Europe and the U.S. . . . In 2007, Russia, 30% increase. China, 20% increase. India, 20% increase. Brazil, Argentina, South America, 25% increase. It's not a question that the whole industry is collapsing. No, if you have a good exposure in these booming markets you are doing fine because you are compensating what you are losing on one side by what's developing on the other side.

WSJ: Can the emerging markets continue to grow at those rates?

Mr. Ghosn: No. If the U.S. declines, it is going to hit the other markets. Now, instead of China booming at 25% it will probably grow at 10%. Instead of Russia growing at 30%, it will probably grow at 15%. Reduced growth, but still growth.

WSJ: How are you going to meet the challenge from China and India in the segment of low-cost cars?

Mr. Ghosn: Tata came up with the Nano [the $2,500 "people's car"], and I was the first one to say that is serious. We are going to come with a car similar to this one. But I recognize immediately that it is impossible with French engineers or Japanese engineers to do a $2,500 car because it's quite a mindset. So what we said is Indians have to do that. So we decided to pool with [Bajaj Auto Ltd.]. Bajaj is a maker of three-wheelers, and for them, moving from three wheel to four wheel is moving up for them because it's high-end. For them it's moving up because they are used to making products with a cost of $1,000 or $1,200.

WSJ: What will the Renault-Nissan electric car look like?

Mr. Ghosn: It's a normal car, a four-seater. We can do a light commercial. We can do a two-seater.

WSJ: Is there commercial demand for an electric vehicle?

Mr. Ghosn: You have companies already today asking for electric cars. Postal companies. Electric companies. Many of them have huge fleets. We have a huge market, but no offer as an industry.

WSJ: Are you comfortable with the battery technology as it exists?

Mr. Ghosn: As it exists? No. But as we see it happening? Yes. Because we are preparing to produce a battery inside the alliance. We consider it practically as a core business. We have signed an agreement with [NEC Corp.]. Nissan-Renault-NEC are working together on a lithium-ion battery, and the lithium-ion battery is going to allow us to reach a level of performance on the electric car which we think is going to be acceptable to most users in the world relative to how much time it takes to charge the car, what is the autonomy of the car [and] what is the weight and cost of the car. We think we are near a solution which is going to allow a mass marketing of the [electric] car.

WSJ: What is Nissan's position on Washington's new energy legislation that raises average fuel-economy standards by 50% in the next 15 years?

Mr. Ghosn: Nissan said from the beginning we ought to take a very open and positive stance because whatever our conviction, the public is expecting cars which are, in terms of emissions, very friendly. Period. It does not matter if we contest that this is relevant for global warming. We have to deliver it.

WSJ: Why has the Renault-Nissan alliance survived for so long while other alliances such as DaimlerChrysler have failed?

Mr. Ghosn: From the beginning it was not Renault people saying to Nissan people, "OK, you know what? We have a better system than you and you're going to copy ours and that's it. I don't care about the Japanese way of doing things. We are going to do it the French way of doing things." All this was put out the back door from the beginning. That's a partnership. That's not an acquisition. We are going to continue to develop the two companies in a very autonomous way.

WSJ: How do you oversee two companies when one is based in Tokyo and the other based in Paris?

Mr. Ghosn: Trying to divide my time 50/50 between Renault and Nissan. Obviously you have to be surrounded by people that you trust completely. There is no hole in the organization. The strategy has to be clear. Budgets have to be clear. Priorities have to be very clear so people are comfortable about making decisions even if you are not here because they have clear set of reference, clear set of goals. They call you only when they have a problem.

WSJ: How long do you plan to remain CEO of both Renault and Nissan?

Mr. Ghosn: I don't think I'm going to do it forever, managing two companies on two continents and flying around. I think it's good for a period, but there is a moment where you are going to have to go for another system with two CEOs with a board for the alliance.

WSJ: How is the arrangement working for now?

Mr. Ghosn: I've been told that in the 500 largest companies in the world I'm the only guy doing this funny thing of managing two companies on two different continents. I'm trying to do it in a way where it makes sense for both shareholders. So far I'm surviving.