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Interview: Carlos Ghosn
By James Mackintosh in Paris

Published: July 28 2006 22:04

Nibbling a croissant as he discusses taking a bite out of rival carmaker General Motors, Carlos Ghosn, head of Renault and Nissan, is clear about why he wants to expand the unusual alliance of the French and Japanese carmakers he runs.

“There is no doubt in my mind that [the industry] is going to go towards more consolidation in the future,” Mr Ghosn says. “And we think we have a competitive advantage.”

That competitive advantage is not based on better cars, or lower-cost manufacturing (although the intense Mr Ghosn wants both). It is, he says, due to the alliance between Renault and Nissan, run as separate companies with a joint chief executive, sharing many components and engineering costs but competing when they cannot agree to share.

Certainly the alliance is one of only a handful of car industry tie-ups to emerge from the wave of mergers and acquisitions in the late 1990s and early 2000s without a crisis.

Others that avoided disaster, such as Ford’s purchase of Land Rover or GM’s acquisition of most of South Korea’s Daewoo Motors, have been on a smaller scale and less financially impressive than Nissan’s turnround.

Mr Ghosn argues that Renault was successful with Nissan – on the verge of bankruptcy when Renault took a minority stake in 1999 – because it was not a full takeover and so involved no cultural clash.

“I consider it a competitive advantage that we have established a business system where we are working together and spending more time co-operating than fighting each other,” he says.

Whether the alliance can be opened up to GM – where executives have struggled to secure co-operation even between their own divisions – is being studied.

Mr Ghosn insists no deal will be struck unless the benefits are at least 10 times higher than the risks, and only if GM is fully behind an agreement.

For now, the odds seem to be against a deal. Rick Wagoner, GM chief executive, has been careful to insist that the possibility will be examined neutrally.

But he has tended to highlight the risks a deal would present to the troubled carmaker’s recovery, while Mr Ghosn highlights the benefits. Mr Ghosn has been careful to prepare the ground for the talks to fail when he meets Mr Wagoner in October.

A deal is not needed to reach the goals of either Nissan’s latest three-year plan or Renault’s commitment to make a record 6 per cent operating profit margin in 2009, he says, and dismisses fears of management distraction from these “challenging” goals.

But if a deal comes about it could change the face of the motor industry, creating a behemoth selling 15m cars a year, almost a quarter of the global total, and able to secure unprecedented economies of scale in purchasing, research and engineering.

It would force rivals to look for their own tie-ups – although most remain wary in the aftermath of messy mergers such as the Daimler-Benz German takeover of Chrysler of the US.

Copyright The Financial Times Limited 2006
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