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November 01, 2016 01:00 AM

After Mitsubishi, Ghosn plots next targets

Hans Greimel
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    Carlos Ghosn doesn't rule out additional partnerships after Mitsubishi.

    YOKOHAMA, Japan -- Carlos Ghosn has been pushing Nissan Motor Co. to be a leader in electrified cars and autonomous driving. Now he is spurring more industry consolidation through Nissan's acquisition of a controlling stake in Japanese rival Mitsubishi Motors Corp.

    The Mitsubishi tie-up, finalized in October, vaults Nissan and its French alliance partner, Renault, into a rarefied league of mega-automakers producing at the 10 million-vehicles-a-year level.

    Ghosn, who soon will be chairman of Mitsubishi in addition to being CEO of Nissan and Renault, says there is room to grow. While he is still chasing many of the goals of his Power 88 business plan for Nissan -- with less than six months to go to its completion date -- Ghosn says he is already contemplating the next round of midterm targets, which he will announce next year.

    Ghosn, 62, spoke with Automotive News' Asia Editor Hans Greimel about the outlook of the U.S. market, the limits of industry consolidation, the likely fate of auto industry startups and his wait-and-see stance about new mobility businesses.

    Q: After completing the Mitsubishi acquisition, is your appetite for bigger scale sated?

    A: There is a complexity limit. But there is no size limit, as long as you can find a partner with whom you can develop a win-win relationship in the long term. We know how to make this kind of partnership work. Ten million is not by definition a wall.

    Don't size and complexity go hand in hand?

    No -- because you can have one partner with very big size. That doesn't make it more complicated. And you have multiple partners with small size. It's obviously more complicated because every time you have a new partner you have a new culture, you have a new executive committee, a new board.

    You don't need time to digest Mitsubishi before seizing the next opportunity?

    The level of support Mitsubishi is going to require in terms of human talent and skilled executives is limited because Mitsubishi is a relatively small company. I don't think this would represent a handicap for additional partnerships. No, not at all.

    Even as traditional automakers consolidate, we see a rush of new entrants such as Tesla and startups from China. How will they weather the forces of consolidation?

    Our industry is moving toward more consolidation. This is going to continue. Obviously, there are plenty of small newcomers, which will, at a certain point of time, represent a force.

    Maybe.

    My fundamental belief is I don't think so. You need at the same time to develop electric cars, hybrids, plug-in hybrids, fuel cells, clean diesels, downsized internal combustion engines, turbos, etc., without counting the fact that you're going to need to develop automated cars, connected cars, on top of the fact that you're going to need to deliver attractive cars with a very high level of quality, with good driving performance, with highly sophisticated standards in a highly regulated industry, very big investments, a very big number of employees and small return.

    It makes a lot of hurdles for somebody to come in and make a splash.

    So what will happen to new startup challengers in the auto industry?

    I know the media love to say we have a new superman coming here, and it's going to make all of you look like dinosaurs. But, frankly, the likelihood that this is going to happen in our industry, in my opinion, is very limited.

    Some carmakers will do a good job in specific niches. Or they will be gobbled up, or they will be acquired. For the foreseeable future, the next five years, the likelihood that somebody comes and changes the rules is very small because the car industry is aware of the fact there is a lot of change coming and is preparing for it.

    How do you expect to amplify Nissan's EV lineup through 2020?

    Volume is going to depend more on government than on us because the EV market is going to be driven mainly by emissions regulations.

    You're going to see the EVs getting into the bigger segments of the market. I would not be surprised to see EVs going into crossovers. I wouldn't be surprised to see EVs moving into segments like SUVs. You're going to see EVs everywhere, little by little.

    Will Nissan be in those additional segments by 2020?

    Without any doubt, we will be present in many segments on the market.

    But you'll have more than the Leaf and the new Note e-Power, just released in Japan?

    Without any doubt. I can tell you there will be many more.

    Can Nissan still achieve your targeted 8 percent operating profit margin on paper by the end of March?

    No. The way it's going for the moment, I think it will be very difficult to reach 8 percent with the exchange rate the way it is today. This being said, I think the underlying performance, if you neutralize exchange rates, in my opinion, will be even better than 8 percent.

    We're talking about fundamental competitiveness and profitability. You have some outside elements, like: Is the [total industry volume] growing? Is your basic currency strengthening?

    The only thing which changed is the exchange rate.

    This year, obviously, everybody's expecting the profitability of all the carmakers in Japan to go down. It's not because all of a sudden they are less competitive. It's all of a sudden something which is completely beyond [your] control giving you a huge hit on your bottom line.

    Does it mean your objective or profitability are irrelevant? Not at all.

    The Power 88 business plan ends March 31. When will you unveil the next business plan?

    Probably sometime in fiscal year '17 [which ends March 31, 2018].

    Will you see the next business plan through to its end as CEO?

    You're going too far here. A midterm plan is six years. I think we're going to stick with six years. First, because you're not going to take quantitative targets for six years. You're going to take quantitative targets for maybe two or three years. But then for six years, you're going to have qualitative targets.

    I think -- particularly with the present state of our industry, the present state of our product, with all the technologies coming -- it's going to be very, very difficult to make forecasts five years or six years down the road.

    What is Nissan planning in mobility businesses such as ride-hailing and car-sharing?

    There is a potential business here. The fact that we or some companies are partnering with other people doesn't mean we think this is going happen. What's important for us is not so much that things happen but what is the size of what's happening. Shared cars are going to be more numerous in the future. The question is: Are they going to represent 2 percent of your car market, 5 percent of the car market, 20 percent of the car market or 50 percent of the car market? I think this is where we need to be very cautious to follow the consumer.

    Are you talking with partners?

    We made an agreement with Microsoft on connectivity. We're working with many other partners.

    There is a revolution coming around our products that is summarized today by zero emissions, connected cars, autonomous cars. How's this going to happen, who's going to do what? Now the real battle is about who delivers what.

    What is your outlook for North America?

    For North America, I think it will be stability. Plus 1 percent, minus 1 percent. I think the market is at a very healthy level. If there is any motion, it's going to be minor. There is no reason for growth, and there is no reason for decline.

    We may be in a situation where you're going be in a minus-1, plus-1 percent evolution. So no big evolution in North America for the next few years.

    And what is the outlook for Nissan's performance in North America?

    In North America, what is important is we're getting market share in all these markets: Canada, the United States and Mexico. The situation in North America is tough, but it's growing well.

    So you expect to increase market share even in a flat market?

    Yeah. But anyone who wants to grow market share in North America is going to have to be extremely competitive. The price war has a limit, which is your profitability. We're going to have to be careful about our profitability.

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