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Louis Schweitzer, CEO of French auto maker Renault, vaulted his company into the global leagues in 1999 when he forged a historic alliance with Nissan, acquiring a controlling 37% stake in the then-troubled Japanese company. He dispatched his deputy, Carlos Ghosn, on what many thought was an impossible mission -- turning Nissan around.
Yet Ghosn succeeded, and did so well ahead of schedule. Today, Nissan is one of the world's most profitable carmakers. Indeed, Nissan's profit contributions helped Renault through a rough patch: The French company saw sales hurt last year by its aging model lineup and the bumpy launch of upscale vehicles such as the innovative, coupe-styled Avantime minivan. Ghosn's success is one of the reasons the soft-spoken Schweitzer said last year that he would hand the reins to Ghosn in 2005 and take a new position as chairman of the Franco-Japanese group.
If the last few months are any indication of what is to come, Schweitzer will exit on a high note in two years. Renault's new Megane compact sedan was voted 2003 Car of the Year in Europe, and production is running at capacity. Also, ties between Renault and Nissan have been strengthened since the original deal was announced: Last March, Renault boosted its Nissan stake and Nissan took a 15% holding in Renault.
Schweitzer, 60, spoke to BusinessWeek's Christine Tierney at the North American International Auto Show in Detroit about his take on the "All-American" show, and about his succession plans. Edited excerpts of their conversation follow:
Q: What was your impression of the show?
A: It's all-American. The larger the better, the more powerful, the better. There was an incredible number of concept cars, such as the Cadillac Sixteen, which stole the show from the real cars.
Q: What were the most striking trends in auto technology?
A: If you look at engines, the evolution of diesel is the most interesting and important trend. Today, diesel-powered cars are more pleasant to drive and are as clean as gas-powered cars.
Q: Diesel-powered cars account for more than a third of new-car sales in Europe because of their higher fuel efficiency -- around 30% higher than similar gas-powered vehicles. Do you believe diesel cars might make a comeback in the U.S.?
A: The appeal of diesel engines comes from the higher torque they get at low speeds, which is very important in the U.S., and the fuel-efficiency, which clearly is not an issue in the U.S. But diesel engines are up to 40% more expensive to produce. It will be an interesting subject to follow.
The prime mover in diesel technology is Volkswagen, but Chrysler's plan to market a diesel-powered Jeep Liberty is interesting, because it's an American brand. But you're not seeing an industrywide effort to promote diesel in the U.S.
Q: You are chairing the European Carmakers' Assn. (ACEA) this year. What's on the agenda?
A: There isn't one overwhelming issue this year. But we will be evaluating how to reduce carbon-dioxide emissions -- the commitment we took as an industry. It's a real issue because of global warming. But if one region of the world tackles global warming in isolation, that's not a [solution].
Q: How is the Renault-Nissan alliance progressing?
A: The alliance has, up to now, delivered faster than I expected -- and much more than anybody expected. We completed the second stage in 2002, establishing a cross-shareholding [envisaged in the original 1999 alliance plan] and an alliance board [to oversee the group's strategy]. We have a structure that works. I don't see the necessity for a third stage. In terms of cooperation, we're moving ahead in joint powertrain development, platform-sharing, and common purchasing.
Q: Why did you decide to announce a successor so far in advance?
A: I had made the decision and, as it was clear in my mind that Carlos Ghosn was the natural successor, I felt it would be much clearer to put a date on this and end any speculation. I will leave before age 65, but I believe that if you can't do things after 13 years [in the job], you probably won't do them.
Q: How do you envisage your next job, as chairman?
A: The job of chairman -- a nonexecutive chairman -- is new in France. Corporate governance is also a rather new concept in France. I believe the primary responsibility of the chairman of the board is to make sure that there's good corporate governance.
Q: You and Ghosn have very different styles. What is your relationship?
A: I recruited him in 1996. At that time, my intention was that he should be my successor, if he were successful. I think we have a good relationship because we know each other well. We are different, but we speak the same language -- and by that I don't mean French. We both put great emphasis on reliability. When you say something, that is what you are expected to deliver.
Q: What have been the high and low points of your 11 years as CEO?
A: The best, the positive challenge, was the alliance with Nissan. Well, I bet the farm on it. The most difficult was the decision to close the Vilvoorde assembly plant in Belgium [in 1997] and to implement that.
Q: How do you think the auto markets will evolve this year?
A: In Europe, which is our main market, we see a stable market or slight decline -- between zero and a drop of 1%, with a drop of 5% to 6% as our worst-case scenario.
Q: Which markets do you think will grow most in the medium term?
A: China, of course. But Central and Eastern Europe are very important. I believe these countries will show the same pattern as Spain, Portugal, and Ireland after they joined the European Union: following a short adjustment, sustained growth that will fuel the growth of Europe as a whole. We have the Dacia plant [in Romania], and our plan to produce a car costing $5,000 [for emerging markets] is proceeding on schedule. We hope to launch it by the end of 2004.
Q: Nissan is very successful in the U.S. Might you ever bring back the Renault brand to the U.S. market?
A: We might consider it from 2010 onward. I'm not sure we have the credibility, given our past history in the U.S. It's a major investment, and I'm not sure we have the right products for the most profitable segments. But the American market is evolving, and so is our model range, so things might change.
Edited by Patricia O'Connell
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Copyright 2003, Bloomberg L.P.
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