Inside Line Q&A: Renault and Nissan CEO Carlos Ghosn
The Icon of Cost-Cutting
By Alistair Weaver, European Editor | Published Sep 24, 2007
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Carlos Ghosn is arguably the biggest name in the automotive world. Born in Brazil to Lebanese parents, he forged his early career at Michelin. His 18-year stint with the French tire company included a spell as CEO of Michelin North America. Ghosn then spent time at Renault before he joined Nissan as its chief operating officer in June 1999. He was named CEO of Nissan in June 2001 and achieved international fame for slashing costs and turning this once ailing company into one of the automotive world's most successful. In March 2005, he also become CEO of Renault and also sits on the boards of Alcoa, IBM and Sony. Such is Ghosn's reputation that he has been linked with the top post at both Ford and GM.
The Renault/Nissan alliance has been hailed as a success, while the Renault/Volvo relationship was a failure. Why was that?
There were a lot of very valuable lessons learned. The failure of the past is the knowledge of today. The success of Renault/Nissan is because of the failure of Renault/Volvo. Renault learned a lot, so we were able to avoid the mistakes of the past. A lot of people in Renault say, "We should not do this because this led to disaster with the Volvo people." This is one explanation as to why Renault succeeded with Nissan, while other alliances have not succeeded.
How do you compare Nissan and Renault?
The companies are at a very different stage. At Renault, we're committed to achieving a 6.0 percent profit margin by 2009, a 4.5 percent in 2008 and 3 percent this year. In the first six months of the year, we hit 3.5 percent, so we're doing OK so far, but it won't be easy. Renault has never made a 6.0 percent margin — only BMW has achieved that in Europe.
Nissan is already at a very high level. People say we are struggling with a return of 7.4 or 7.5 percent. They say we are a distressed company [laughs]. The expectations are so high that even a small disappointment is considered to be a slump. We must maintain the pressure on Nissan to avoid complacency.
Renault has set a target of selling 800,000 cars. How do you intend to achieve this?
It is new niches, new markets and new products. We have no 4x4s at the moment but by the end of the year, we'll have a 4x4 sold in Korea and Europe, so you have instant volume. In India in 2005 we sold zero cars; this year we shall sell 50,000. We sell no cars in Iran at the moment, but we should be selling 200,000 cars there by 2009.
You beat the world when you introduced the first $5,000 car, the Logan. How did you achieve that?
You can only achieve a $5,000 car by starting from scratch and making a breakthrough. Others are trying to make the same breakthrough, but they're still two years away. We are now working on the next Logan and we'll learn from our mistakes with the first car.
We understand you have plans for a $3,000 car. How are these shaping up?
To produce a $3,000 car, we need to make another breakthrough and we need an Indian partner. The $5,000 Logan is built in Romania (Eastern Europe), but you would have to build a $3,000 car in India. We have a tentative agreement with Bajaj [India's second-largest motorcycle manufacturer].
Does Formula 1 still make sense for a passenger-car manufacturer?
People are only interested in those questions when you're losing. No one cares when you're dominant. The 2006 season [when Renault won the F1 drivers and constructors championship] was a tough season and all the resources were concentrated on developing that car, rather than developing the 2007 car. This year, we've also been affected by changes to the drivers and tires, but we're now preparing for 2008.
You can't win every year, but you need to be able to compete for wins. You need to be in the top two or three teams. If you're a top team, F1 remains a good marketing proposition, but we need to keep driving down the costs and to curb the crazy race for technology. The public wants a show, and technology does not always create a show.
Is there a link between F1 technology and road cars?
There's no direct link but there is an indirect link. If you observe the systems and processes used in Formula 1, you can learn a lot about ensuring a road car's reliability. It is one of the toughest competitions on earth and it can have an indirect impact on our engineers.
From Renault in particular, we have seen a lot of conservative designs. Is there an explanation for this?
Avant-garde styling works in some segments, like a sports car. But in the D-segment [European midsize sedan] people want reliable, robust cars with a competitive cost of ownership and good driving performance that will look modern in six years' time. Edgy, modern design does not last. Car design is a marathon and not a sprint — a car needs to sell well in its last four years, not just its first two. You must be prudent and not give the consumer what he doesn't want.
In Europe, Renault's executive car, the Vel Satis failed. Why?
We tried to do something completely different from everything else, which is a good thought. But when you try to do that, there is a danger that you can become completely marginalized, which is what happened with the Vel Satis.
Secondly, when you do something completely new, it has to be impeccable in terms of quality and reliability. If you do something new and it's shaky in terms of quality and reliability, then the innovation becomes suspicious. People start to be afraid of innovation. We have now improved our testing standards.
We do cars for a global market. When we design a car we must be sure that it doesn't just fit the French needs, or the European needs, but the global needs. That must influence the design.
The Renault/Nissan alliance has been hailed as a success, while the Renault/Volvo relationship was a failure. Why was that?
There were a lot of very valuable lessons learned. The failure of the past is the knowledge of today. The success of Renault/Nissan is because of the failure of Renault/Volvo. Renault learned a lot, so we were able to avoid the mistakes of the past. A lot of people in Renault say, "We should not do this because this led to disaster with the Volvo people." This is one explanation as to why Renault succeeded with Nissan, while other alliances have not succeeded.
How do you compare Nissan and Renault?
The companies are at a very different stage. At Renault, we're committed to achieving a 6.0 percent profit margin by 2009, a 4.5 percent in 2008 and 3 percent this year. In the first six months of the year, we hit 3.5 percent, so we're doing OK so far, but it won't be easy. Renault has never made a 6.0 percent margin — only BMW has achieved that in Europe.
Nissan is already at a very high level. People say we are struggling with a return of 7.4 or 7.5 percent. They say we are a distressed company [laughs]. The expectations are so high that even a small disappointment is considered to be a slump. We must maintain the pressure on Nissan to avoid complacency.
Renault has set a target of selling 800,000 cars. How do you intend to achieve this?
It is new niches, new markets and new products. We have no 4x4s at the moment but by the end of the year, we'll have a 4x4 sold in Korea and Europe, so you have instant volume. In India in 2005 we sold zero cars; this year we shall sell 50,000. We sell no cars in Iran at the moment, but we should be selling 200,000 cars there by 2009.
You beat the world when you introduced the first $5,000 car, the Logan. How did you achieve that?
You can only achieve a $5,000 car by starting from scratch and making a breakthrough. Others are trying to make the same breakthrough, but they're still two years away. We are now working on the next Logan and we'll learn from our mistakes with the first car.
We understand you have plans for a $3,000 car. How are these shaping up?
To produce a $3,000 car, we need to make another breakthrough and we need an Indian partner. The $5,000 Logan is built in Romania (Eastern Europe), but you would have to build a $3,000 car in India. We have a tentative agreement with Bajaj [India's second-largest motorcycle manufacturer].
Does Formula 1 still make sense for a passenger-car manufacturer?
People are only interested in those questions when you're losing. No one cares when you're dominant. The 2006 season [when Renault won the F1 drivers and constructors championship] was a tough season and all the resources were concentrated on developing that car, rather than developing the 2007 car. This year, we've also been affected by changes to the drivers and tires, but we're now preparing for 2008.
You can't win every year, but you need to be able to compete for wins. You need to be in the top two or three teams. If you're a top team, F1 remains a good marketing proposition, but we need to keep driving down the costs and to curb the crazy race for technology. The public wants a show, and technology does not always create a show.
Is there a link between F1 technology and road cars?
There's no direct link but there is an indirect link. If you observe the systems and processes used in Formula 1, you can learn a lot about ensuring a road car's reliability. It is one of the toughest competitions on earth and it can have an indirect impact on our engineers.
From Renault in particular, we have seen a lot of conservative designs. Is there an explanation for this?
Avant-garde styling works in some segments, like a sports car. But in the D-segment [European midsize sedan] people want reliable, robust cars with a competitive cost of ownership and good driving performance that will look modern in six years' time. Edgy, modern design does not last. Car design is a marathon and not a sprint — a car needs to sell well in its last four years, not just its first two. You must be prudent and not give the consumer what he doesn't want.
In Europe, Renault's executive car, the Vel Satis failed. Why?
We tried to do something completely different from everything else, which is a good thought. But when you try to do that, there is a danger that you can become completely marginalized, which is what happened with the Vel Satis.
Secondly, when you do something completely new, it has to be impeccable in terms of quality and reliability. If you do something new and it's shaky in terms of quality and reliability, then the innovation becomes suspicious. People start to be afraid of innovation. We have now improved our testing standards.
We do cars for a global market. When we design a car we must be sure that it doesn't just fit the French needs, or the European needs, but the global needs. That must influence the design.