Quotes of the Day
Carlos Ghosn is the CEO of Nissan Motor Co. of Japan and Renault S.A of France, which have benefited from a six-year cross-ownership alliance. This week, Ghosn was in the U.S. for talks with struggling General Motors, to test GM's appetite for forming a three-way alliance. Ghosn is perhaps the automotive industry's most accomplished executive, having pulled both Nissan and Renault out of nose dives. On his way to Detroit, he stopped in New York City to talk with TIME's business editor Bill Saporito. Here are his views on the potential GM hookup.
Most mergers and partnerships fail. Why has the Nissan-Renault association succeeded?
It's a partnership of two companies — and completely. Nissan is not a subsidiary of Renault. The two companies have two different boards, they have two different executive committees, two different shares, one is trading in Tokyo, the other one is trading in France. And it has been successful now for seven years. You know that you can be successful for six months, for one year, but when you are successful for seven years, growing and delivering profit and value, it's significant of the fact that you have a system, which is stable, and a business in which people feel comfortable working together without mixing identities or without mixing cultures. I think one of the reasons this alliance is working is because not only is there clarity of the principles, but that we follow the principles by the book. There is no difference between what we say, what we do, and what we think. And what we think is we are extremely cautious in maintaining the brand and corporate identity of each company, separate and distinct. We are extremely cautious about making sure that autonomous decision-making is being made. We are very cautious about the fact that anything happening in the alliance should be win-win. You're never in a situation where one wins and the other loses, thinking that the next time the second will lose and the first one will win, because this doesn't work. And making sure that everything we do or change is only for the bottom line.
Why then, would you want to be a partner with GM? What do you think you could get out of it?
It can accelerate the growth of each company, and it can boost the profit potential of each company. And by the way, it would be done in a situation where, in my opinion, it's going to be beneficial for the three of us. I think also, if it's done very well and if we work well, it's going to have the same impact on the third party — as long as the third party is convinced that there is potential behind it. Again, this is more an opportunity than it is mandatory. Some people say, why this timing? You never set any timing on an opportunity like this... I would certainly not select the present time. Because Nissan sales are down in the United States and they will be down for the next couple of months. They will start to pick up in October with the launch of many new products coming into the hot segments of the market, like the Centra and the Altima and the G35, etc. But, you know, you can't time an opportunity. An opportunity comes and you are just going to have to say yes or no. And we said yes because we believe that there is a lot of potential. The only question which is open is, how much of this potential can we reasonably deliver? And what kind of organization will need to deliver that? And will we have a complete buy-in from all the parties involved? Because this is an important question... We said from the beginning, it's going to be friendly, collaborative, or it won't be at all.
What is the most important thing that Nissan-Renault can offer GM?
Obviously the two companies are very healthy, strong balance sheets, good experience with working together without overshadowing one or the other. We have internal benchmarks, internal best practices. We have products in all the segments of the market, good knowledge globally, we had all the experiences of turnaround. We have been, from both sides, in tough positions and we know how to handle it. We have talents all over the globe. I think the most important thing is sit down together with GM and with our own experts trying to see what's at stake, how much can we do together that we could never do alone. And how much this has a potential benefit for each other.
You seemed to have figured it out.
Let me tell you what is interesting: when we put Renault and Nissan together, we took a lot of items and we said, OK, what can we do together on these particular lines, and at the end of the day, we discovered that after six years we did much more than we thought. Even though we were not able to quantify them, because it is hard to say what is due to the alliance, and what is due to your own effort. For example, if you have your own purchasing strategy, how much of the purchasing cost reduction is due to the fact that you have access to the data of your partner and you knew exactly what was the cost of it, and access to his supplier versus your own effort, or streamlining your process and organizing a better job between purchasing and engineering? And frankly it's irrelevant. What is important is to deliver the result... And that's what we need to confirm in the talks with the managers of General Motors, that there are a lot of areas where we can, Renault and Nissan, benefit a lot from collaboration, enhancing the Renault and Nissan performance and hopefully, enhancing also the General Motors performance. But this is up to General Motors to say. That's why the critical phase which has been opened now that top management said we are ready to talk, and the board of General Motors said we're ready to talk, is outlining all these areas and trying, with our own experts, to say how much potential is there in each one of these areas for the three companies. That's very crucial. Because, if you come to an amount [of potential] that would appear as very small compared to the energy that is going to have to be spent there, then you better stop. But if you come to an amount which is big enough to counterbalance the risks, to counterbalance the energy that you are going to have to give up in order to deliver on it, then the only question is how do you organize yourself in order to deliver.