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Carlos Ghosn's automaker mantra: Go big or you'll go away

Tue, 25 May 2010

Size matters in auto company survival, Renault and Nissan CEO Carlos Ghosn told an audience in Detroit on Tuesday.

To cope with the escalating costs and scope of a global industry, successful automakers must complete a trifecta--be able to compete in every technology, every market and every segment, Ghosn said during a luncheon speech at the Detroit Economic Club

“No 3 million-unit carmaker can make it,” Ghosn said, explaining why his Renault-Nissan alliance forged an alliance with Germany's Daimler AG.

Competency in one or two of the three skills is not enough, and only very large companies can afford all three, he said.

Technology is getting more expensive. Automakers must simultaneously develop gasoline, diesel, hybrid and electric vehicle technology because they can't predict which technologies will prevail, Ghosn said.

“You also must be in every market--and it's not just Japan, Europe and the United States anymore but also Brazil, Russia, China and India. And you better be in Indonesia, too,” he said.

“And you can't be viable as a niche player, so you need to be in the upper, lower, 4-by-4 and crossover segments.”

'Technologies are expensive'

France-based Renault and Japan's Nissan do not consolidate their financial results and in some ways remain separate companies, but they cooperate on platforms and powertrains and some manufacturing. Through a holding company, Renault owns about 42 percent of Nissan.

That type of alliance is more flexible than a conventional merger, Ghosn said. He also cited the new alliance with Daimler--initially to cooperate on developing a replacement small platform for Daimler's Smart division--as a better way to cooperate.

“Technologies are expensive and you need a partner because nobody can afford to do it all alone.” Ghosn said.

Major players ... someday

He predicted that as the Chinese auto market develops, domestic Chinese automakers eventually will emerge as major players.

“Right now, there is not one global Chinese automaker,” he said. “Not one has the scope of a company like Renault-Nissan or Volkswagen.”

But soon, a Chinese automaker--or perhaps an Indian company--will “buy something nobody else wants” and become a worldwide force, Ghosn predicted. “It could happen much faster than everybody expects.”

Much like the Koreans did in recent years, emerging-market automaker powerhouses can develop by constantly “benchmarking and copying best practices,” he said. “Nothing is ever unchanging in our industry.”

By Jesse Snyder- Automotive News