* 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 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
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
"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
His insistence on that point may well stem from his initial
experience at Nissan. As the first 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 controlling company and the controlled,"
Alliance Berstein Senior Vice President Takaki Nakanishi said.
"They say governance is sound, but sometimes you're left