CORRECTED-SPECIAL REPORT-Ghosn seeks new story for auto alliance

Mon Feb 28, 2011 6:26am EST

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(Please change the sentence in paragraph 19 to read "As a non-Japanese president..." instead of "As the first non-Japanese president..." A corrected repeat follows.)

* Ghosn known as turnaround artist with strong views

* Opposes full merger of Nissan and Renault

* Reviewing complicated capital structure of alliance

* Defends Renault's handling of espionage case

* Some question viability of his dual-CEO role

By Chang-Ran Kim, Asia autos correspondent

YOKOHAMA, Japan, Feb 28 (Reuters) - Even for Carlos Ghosn, the supremely confident CEO of the Renault-Nissan automotive alliance, criticism sometimes hurts.

In those moments, he turns to a pile of boxes filled with news clippings documenting his stewardship of Japanese automaker Nissan , a debt-ridden company more than a decade ago that some feared was heading toward bankruptcy.

"From time to time, when I'm a little bit discouraged, I go back, open one box, and read some of the articles from 1999," the Brazilian-born Ghosn told reporters one June afternoon in 2007, after a grilling from shareholders unhappy with Nissan's fall in profits.

"I say, 'Wow, I prefer to be here now than back then."

Ghosn might want to rummage through those boxes again.

This time the scrutiny is over the French end of the Franco-Japanese automotive alliance, at Renault where he was named CEO six years ago.

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.

On Feb. 10, Ghosn (rhymes with "loan") unveiled a new six-year business plan for Renault, promising to generate more cash and profits to reward shareholders. To his surprise, investors gave it the thumbs-down, and Renault's shares have fallen 12 percent since the announcement.

Investors were mostly unhappy that Ghosn had failed to address one of their biggest gripes: the financial structure of the Renault-Nissan alliance.

It is a complicated structure.

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, the investors argued.

"It's a fair challenge," Ghosn told Reuters in an interview on Friday in his 21st floor corner office at Nissan's global headquarters in the Japanese port city of Yokohama. He said he was surprised by the market's negative reaction to his plan for Renault, and stressed he would make the necessary changes to the alliance's capital structure within three years.

Over the course of a far-ranging interview, Ghosn exuded his signature flair and confidence, speaking rapidly and occasionally shifting forward in his armchair to emphasise a point. Behind him was a small mockup of an Infiniti M37S sedan, and a Picasso hung on one wall.

Judging from his ability to cite the latest currency rates and oil prices, it's clear he always has an eye on the markets. A Bloomberg terminal sits on his desk next to a set of keys to a Nissan GT-R sports car and the brand new, all-electric Leaf.

But his decision-making was based on a longer horizon, he said.

"You have to be careful that at the end of the day, by trying to do more in the short-term you don't end up destroying what had been delivering so much result on the mid-term and long-term," he said, referring to the billions of dollars in development and other costs the companies had saved.

And a merger? Out of the question, Ghosn declared.

"It is not validated by any example in the car industry that this works. Not one example. And saying something different is just rubbish."

TURNAROUND ARTIST

His insistence on that point may well stem from his initial experience at Nissan. As a non-Japanese president of an automaker in the rigid corporate culture of Japan, he seemed unafraid to break the mould, as he set about turning around a company that had lost money for most of the 1990s. He was even criticized for not mastering the customary Japanese bow.

Nothing succeeds like success, however. As Nissan grew increasingly profitable, and the dividends started flowing, the accolades started coming. He even became the subject of a 160-page graphic novel, the first non-Japanese to be featured in a stylized Japanese illustrated manga book.

Tackling a hidebound corporate culture had become Ghosn's forte. Renault hired him as one of its top executives in 1996 from France-based Michelin, where he had risen to become CEO of the tyre maker's North America operations. He had established his reputation as a turnaround artist there after engineering a merger with U.S. tyre maker Uniroyal that effectively doubled the size of his Michelin division.

His French connection drew him into Renault, in which the French government still had a controlling stake at that time. Fortune magazine once quoted Ghosn as saying about Renault in those days that the company "put a premium on the fine phrases and arcane knowledge" and wasted time on "discussions about everything and nothing".

Renault flourished during Ghosn's time as executive vice president. By around 2005 it had become the best-selling brand in Western Europe and the French government's stake kept dwindling to its current 15 percent.

But now Renault's shareholders are grumbling again, after seeing its share price tumble more than 30 percent since Ghosn assumed the CEO's post in May 2005. It seemed to underscore his reputation as an expert at fixing a broken company but less skilled at running a company whose future is more secure.

"Ghosn works best in crisis mode, than in cruising mode," said UBS Securities auto analyst Tatsuo Yoshida.

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.

He said his current dual-CEO title works well, despite the carping about Renault needing more of his attention.

"It guarantees partnership, the same level of decision (making)," he told Reuters, indicating his desire to extend his two-year term at Nissan this year.

Some analysts and investors beg to differ, saying Renault and Nissan's interests might be divergent at times due to an imbalance in the alliance. While Nissan has the bigger market capitalisation, it is technically controlled by Renault. Nissan holds just 15 percent of Renault.

When the Renault-Nissan alliance conducted an equity swap of an equal cross-shareholding with Daimler last year, many felt Nissan got dragged into the deal since the projects mostly involved Renault and Daimler. Then again, Ghosn is Nissan's biggest individual shareholder, with stock worth more than $30 million.

An industrial espionage scandal that has engulfed Renault has been another headache for Ghosn. French intelligence services are investigating a possible Chinese connection. Renault, which has fired three executives -- all of whom say they have done nothing wrong -- has come under fire for its handling of the case, after it conducted an internal investigation before informing the authorities.     Ghosn has insisted Renault's actions were justified. "When a company is facing a problem, it always takes a stance and takes a decision, but at the same time it wants to make sure of what it can learn from it, what enhancements it can make. Obviously I cannot tell you more because we are waiting for French justice to take a position."

But some analysts say his split focus on two separate companies, each embedded in their particular cultures, is a huge challenge for him.

"Any way you slice it, it's strange for the same person to be CEO at both the controll

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