Ghosn: 'The U.S. Auto Market Is Not Going to Be Great Again'

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Nissan has just executed two product deals with Chrysler for you to supply them with a small car and for them to build a pickup truck for you. You have often expressed the desire for North American alliance partner. Are you laying track for a deal with Chrysler?

These deals are very good for Nissan as standalone deals. They don't have to lead to an alliance. You know, all of the other global alliances and mergers and acquisitions, according to a study by McKinsey, destroyed value in the companies [Daimler's acquisition of Chrysler, BMW's acquisition of Rover, and Ford's acquisition of Jaguar and Land Rover are just some of the most recent examples]—except one. And that is the Nissan-Renault alliance. I still think extending to North America is a logical step for our alliance strategy, but the timing of such a deal is very important. Now, with raw material markets going through the roof, the credit crunch, energy prices…I don't think the markets are so interested in absorbing grandiose deals in our sector. I think the markets are much happier when you do the things that make sense and when you are playing to your strengths.

Like the deals with Chrysler?

We have a lot of expertise in small cars. Chrysler has an excellent truck program. So, yes.

It looks like you have overcapacity developing in the U.S. because of slow sales of your pickups, minivans, and SUVs. And you are moving light commercial vehicles into your pickup plant. Do you really think that will make up for the failure of your trucks to catch on?

Our plant in Smyrna, Tenn., is operating pretty full. In Canton, Miss., you are right, utilization is down because of trucks and SUVs. But we think the light commercial market is an opportunity. There is no Asian company operating in the U.S. market for vans and delivery vehicles. There is very little innovation from the established players. We think we can win share by innovating. And we will also export to other markets from Canton.

To take advantage of the weak dollar?

Yes. Exactly.

The U.S. seems to be headed for much more fuel-efficient technology. And emerging markets like China and India are clearly wanting fuel-efficient and cleaner-running vehicles. Where are you placing your bets?

Electric vehicles are going to be a big factor in these markets. Powered off electricity, they have the benefit of drawing off different source of electric power—coal, wind, solar, nuclear. And some people have this notion of electric vehicles being slow and unsafe. The cars we are developing are much more substantial than the previous generation. We will launch an EV in the U.S. in 2010. We have joint ventures in Israel and Denmark and will have EVs in the mass market there in 2012. We are not just talking about one car amid 60 in our portfolio, but a real portfolio of electrics in Nissan and Renault. The explosion of vehicles we think is possible in emerging markets will not happen if the cars all run on oil.

Will consumers be more accepting?

We have the demand now, but not the supply. I can't recall that happening in the car industry before. Remember, oil was about $15 per barrel when EVs came and went before. Oil is going to remain expensive. And we are building for the coming generation of car buyers. Even in the U.S., we see today's teenagers not looking at your brand when they are buying their own vehicles if you don't have a broad lineup of fuel-efficient cars. Right now, fuel economy is not a big factor in attracting a buyer, but if you don't have it, it can be a big factor in your brand being rejected.

Five years ago, the North American management of Nissan didn't think there was a market for the Versa model we sell now. It is at the top of the segment now. When the Logan [a low-priced line of cars Renault produces for the European market in cooperation with Romanian maker Dacia—ed.] was developed, it was done for emerging markets like India. Then Europe saw it, and said they wanted it. The most important thing we are doing is developing different products and technologies for local markets. That gives us a broad and diverse portfolio of product. Then, as conditions change in another market, we are ready to take advantage.

Do you think China and India could be places from which to export vehicles to the U.S.?

No. Parts, yes. And engines in the future. But whole cars…I would say no. We have better ways of supplying North America from our plants here, and in Mexico and South America. But we can certainly lower our costs by shipping more parts for assembly in North America.

Do you see a full-blown merger between Nissan and Renault?

While I am CEO, no. It is out of the question. The day they want to vote for an outright merger is the day I go.

So, where are you taking the alliance, and why do you need to be CEO of both companies?

I never said that the way it is now [with me as CEO of both] is the only governance. But what I have said is that we need to take the alliance from passive synergies, like having a plant with excess capacity in one country and sharing it with the other or jointly buying batteries, to more active synergies. Those are building a plant together, or imagining an electric car together, or doing a $2,500 car together. At the end of the day, you need one decision-maker for these things. To get the bickering that would result off the table. In this period of time, it's very productive for us. Last year, we launched four major alliance programs in one year. It is not a coincidence that this happens when there is one CEO for both companies.

Last year, even in 2006 when we didn't meet our product target at Nissan, though we still made $4 billion in profit, we got 98.5% shareholder approval that they want me to continue.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.