JAPAN: Nissan CEO Carlos Ghosn looks to adapt the Nissan-Renault alliance to the market

Record ID: 464960

  • Title: JAPAN: Nissan CEO Carlos Ghosn looks to adapt the Nissan-Renault alliance to the market
  • Date: 1st March 2011
  • Summary: TOKYO, JAPAN (FILE - DECEMBER 2010) (REUTERS) (*** FLASH PHOTOGRAPHY ***) GHOSN AND MITSUBISHI MOTORS PRESIDENT OSAMU MASUKO TAKING SEATS AT NEWS CONFERENCE GHOSN AND MASUKO SHAKING HANDS AND WALKING AWAY
  • Embargoed: 16th March 2011 12:00
  • Keywords:
  • Location: Japan, Japan
  • Country: Japan
  • Topics: Industry,Transport
  • Reuters ID: LVA823GWR0VWXIKV25ZZVQ9X3189
  • Story Text: Carlos Ghosn, CEO of the Nissan-Renault alliance, said he was looking for change in relationship of the two companies in order to meet changing market condition and as he faces growing Renault shareholders resistance to his business leadership.
    Sitting down with Reuters in an exclusive interview on Friday (February 25), the Brazilian-born Frenchman had unveiled earlier this month the Renault's new six-year business plan, promising to generate more cash and profits to reward shareholders.
    To Ghosn's surprise, investors gave it a thumbs-down, and Renault's shares have fallen 12 percent since the announcement.
    Although the 12-year Franco-Japanese partnership is often viewed as a success story in an industry littered with botched tie-ups, Renault investors seem less than thrilled about it lately.
    While Nissan has the bigger market capitalisation; it is technically controlled by Renault. Nissan holds just 15 percent of Renault.
    Investors were mostly unhappy that Ghosn had failed to address one of their biggest gripes: the financial structure of the Renault-Nissan alliance.
    Renault has $20 billion of its capital in a 43.4 percent share in Nissan. That exceeds Renault's own market capitalisation of $18 billion.
    If the point was to have a partnership that the two sides could benefit from, Renault could do it with a smaller stake in Nissan and put the cash to better use, they argued.
    Ghosn emphasised however that his biggest task has been and will continue to be managing the alliance in a way that keeps both sides content and profitable.
    "What's my biggest challenge? My biggest challenge is modernizing, adapting the alliance, and at the same time keeping the strength of the alliance. Because every time you're making changes, you're taking some risks, okay. So what I would like is to adapt the alliance to the new reality of the market, make the change which are necessary but keep what made the alliance so, in a certain way, resourceful and so strong in front of adversity. Because for the last 11 years, never heard about conflict or problem at the level of the alliance. We want to keep this spirit. That's my biggest challenge," Ghosn said to Reuters.
    This insistence on keeping an equal alliance with separate identities helped Nissan convince China's Dongfeng Motor to form a joint venture, a partnership regarded by some as one of the most successful in the world's biggest car market.
    Nissan also reached out to competitor Mitsubishi Motors last year to increase their competitiveness amidst the strength of the Japanese Yen.
    But the market's skepticism over Ghosn's leadership isn't only about the alliance. Renault's core automotive business remains unprofitable and its share price since Ghosn assumed the CEO's post in May 2005 has fallen more than 30 percent.
    While some contend that Renault needs more of his attention, Ghosn said his current dual-CEO title works well.
    "At the end of the day, the bottom line is when your mandate is finished, you go in front of the shareholders. If they want you to continue that means they have a good evaluation of what you're doing. That's the bottom line," Ghosn said.
    Ghosn, who turns 57 on March 9, spends a third of his time in Japan, a third in France and the rest flying around the world to check on the companies' overseas operations and networking with dignitaries at international conferences.
    Thanks to Ghosn's aggressive drive into emerging markets such as China, Nissan is looking at a banner year.
    Lately, though, investor optimism has been more guarded and analysts such as BNP Paribas's Andrew Phillips have said that Nissan will have to use its strength in emerging markets but also focus on the United States.
    "Well, I think he's sort of really been indicating that the emerging markets are where he wants to focus the resources. We're right at the end of the current, well the previous mid-term plan was to spend it after the financial crisis. The company has indicated there should be a new one coming soon, so I think that will be something which the company will be giving a better roadmap on, of where they're looking to take it. But certainly, the strength in those emerging markets is important, but at the same time I don't think we should underestimate the earnings contribution from a recovery in North America." Phillips said.
    One of Nissan's biggest problems is that American car buyers don't see its brand as all that attractive.
    Last year, Interbrand ranked Toyota's brand value 11th in its annual survey of global companies, down three spots following its recall troubles.
    Among mass-market automakers, Honda came next, in 20th place, followed by Ford Motor, Volkswagen and Hyundai Motor. Nissan didn't even make it into the top 100, and Nissan spends $1,000 more in discounts and other incentives to sell each car, on average, than Toyota or Honda in the United States.
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