Transcript of Carlos Ghosn interview
Nissan CEO Carlos Ghosn - Thank you, thank you. Well, I’ve been asked to make a few minutes’ introduction about Nissan’s reaction to the unfortunate and tragic event that hit us on March 11. As you know, usually a crisis always happens where you’re not expecting them. And no matter how much preparation you have, all of a sudden, something happens, unexpected and this is where companies or countries are being tested not so much about what is the plan in front of this crisis but about how fast, how strong, how deep, how engaged you’re going to be in front of what’s hitting you. And in fact, we had it two times within the last three years. First time was the financial collapse of the system at the end of 2008 and the second one was as you know, on March 11.
First reaction that we had when this hit us is you know, we need to be in one place, gathering all the information about what’s happening at the level of the company and try from this particular place to give very simple, very simple instruction, very simple priority, very simple reassurance to everybody within the Nissan network in these circumstances. So in fact, we had the kind of crisis management committee where all the functions of the company were meeting in one specific place in the headquarters and from there, we were gathering all the information about what’s happening within our system and eventually, we were answering some questions coming from the people who were on the ground facing the different issues. The first preoccupation was is there any human life lost within the company? Who is not accounted for? Can we connect with all the people? This was the first priority. And the second one is, what can we do to help you? You know, what can we do to help you, you who are in Iwaki Plant, which as you know, is 60 km from the Fukushima power plant which was one of the hardest hit plant in our system, but this was not the only one, you know. We connected with Obama, with Tochigi Plant, with many, many different; we wanted to make sure that our data center was still functioning. So it was a period of time where you know, people were touched professionally but even personally because each one of the people in the Nissan family had some tragedy going on in their family, in their relatives, or in their friends. And what we want to make sure is you know, a lot of respect for all the situation which were surrounding the family situation but at the same time, restoring the company with a lot of empathy for the problem that people are facing, but restoring it with a lot of determination and with clear priority, knowing that clarity was not something obvious because we did not know exactly what was going on, okay? So, and little by little, day after day you know, our assessment of the situation became clearer, our assessment of the damage became clearer. And then when we had a clear understanding about what was going on inside the company, we started to move outside the company in the extended enterprise, going to our dealer from one side and going to our suppliers from the other side.
So this process- we didn’t follow a book, we followed very simple rules. You know, our assessment of the situation at the beginning is completely different from the one that we have today, which mean we had a big evolution, a very important evolution within the last three months. And we thought that the damage and the loss of production and of sales at the beginning would be much bigger than what we think today, which means that there had been a tremendous engagement not only of people inside the company but people surrounding the company. And I can tell you today, we’re going to announce our forecast for the year 2011 finally tomorrow. And I think you’re going to be surprised about how far we have covered ground to recuperate the company as soon as it was possible. Yeah, I mean, every crisis as you know, brings lessons. There is nothing we can do in front of a tsunami or an earthquake. This is imposed on us, it happens at a certain moment, you’re not expecting it. You’re just going to have to deal with it. The only thing that where you have you know, which is important is what are the lessons that you learn? What are the practices that you’re going to put into your DNA so if something similar happens in the future, it may not be an earthquake and a tsunami, it may be something else of the same nature, well, this lesson would have served you. This lesson would have served you. And these practices, processes, attitudes, cares that you know, that you’re going to be developing, are going to be extremely important particularly for the recovery of the company or for the recovery of the country. We, at Nissan, we’ve been in too many crisis. Some of them are common to everybody like the financial crisis or the tsunami but we had our crisis on our own when we had to operate the turnaround of Nissan. We were in a situational crisis but this was a crisis fabricated by ourselves, by our mismanagement, or by our lacking of clear priorities. And every single time you know, the getting out of a crisis require the same kind of elements, implemented in a different way; happening in maybe a different kind of priority but always the same kind of elements. And even though we are all hit by the same crisis, we do not react in the same way and we do not recover in the same way. This has been a tragedy for our company, it has been a tragedy for our own people, it has been I know, a tragedy for Japan but at the same time, it’s also a great opportunity to fix certain things that you could not fix before. This presents us with this opportunity and this is the way I would like to look at this tsunami, earthquake, tragedy as at the end of the day, to open our eyes on certain weaknesses into our own system and we were not ready to fix these problems before. Now, we are ready to fix them and hopefully, Nissan will be stronger after the earthquake than it was before the earthquake and I would do everything I can and we will do everything we can so Japan will be stronger after the earthquake than it was before the earthquake. This being said, I know that you don’t want me too much to talk, but you want me to answer to some, to certain of your questions so I give the floor to you.
Thank you, Mr. Ghosn. Okay, as you said, we wanted to leave enough time for questions and tonight, we have a moderator which I’m also happy to introduce to you; another man who loves Japan. He’s been coming to Japan for 25 years. Paul Ingrassia is our Deputy Editor-in-Chief of Reuters News. And he is a winner of the Pulitzer Prize in 1993 for his coverage of General Motors. He’s also written a book about the American car industry and in his book, he mentions Mr. Ghosn. He says, “This remarkable turnaround happened because Carlos Ghosn had embraced just the sort of take-no-prisoners approach that might have helped save General Motors.” So I’m not going to compare Japan to General Motors but I hope that we can have just as candid and passionate a discussion about how to rebuild Japan, moderated by Paul.
Well, thank you, Abi for that very kind introduction. Thank you, Carlos for your opening remarks. It’s really a pleasure for me to be interviewing Carlos Ghosn again. It’s hard to believe that he came to Japan and Nissan in 1999. I think since then, you’ve outlasted five CEOs of General Motors perhaps, and I don’t know how many Prime Ministers of Japan. A few. But your opening remarks I think, really sort of got to the heart and the spirit of this discussion in this meeting. You know, when you took over Nissan, there was a true crisis going on. The company’s very existence was threatened and so now we have Japan which really has sort of had three crisis, if you will. We had the tsunami of course, we had the long-term population issue, and then we also have this enormous budget deficit issue that the country really can’t seem to get its arms around. What kind of lessons from the turnaround of Nissan do you think can be applied to Japan’s situation right now? And be as specific as you can.
Yeah, well you know, you mentioned the three items which are you know, the tsunami earthquake, the demographic preoccupation, the deficit. We can add to it to the volatility of the exchange rate for a heavily export country which is relying mainly on export, etc. So we can add to all of these. The most important thing when you are in a situation where problems and challenges are facing is you need to establish a clear level of priorities and you need to establish also a clear level of importance. You know, there are certain things which are you know extremely urgent but not as important and a lot of things which are absolutely fundamental to fix but not very urgent. So you need to have this clear understanding of the situation which means that you need to have a kind of diagnosis, a clear diagnosis of the situation of the company or of the country and then share the vision about what other priorities and what are the things which are fundamental. This is absolutely essential. This is absolutely essential for a very simple reason because after this, you’re going to act and when you’re going to act, if you want to act fast and in an effective way, you need to have people aligned with you. And people will never be aligned if they don’t share the vision.
So my first and most important element is when you are in a situation where you have so many challenges that everybody’s confused, you need to establish a diagnosis of the situation. Share it and then make sure that you communicate about what other priorities and why these priorities. So debate is taking place, people align and then everybody move in the same direction. Let me take the case of Nissan and then maybe eventually we can talk about the case of Japan. In the case of Nissan, you know the diagnosis we’ve made in 1999 was first thing is we need to get back to profit immediately, get back to profit. You can’t continue to have a hemorrhage, financial hemorrhage, get back to profit. This is very urgent. Is this fundamental? It’s not the most fundamental problem but this is a very urgent problem, get back to profit. The second one is you have to establish your product lineup because at the end of the day, we sell cars. You know, design, products, product revival. Third, you need to be sure that you are present in the right geographical areas, expansion. Fourth, you need to establish which is most important asset you have which is your capacity to produce technology and to develop something which is going to be exciting people, okay? So I would say establish profits, bring new products to the market, expand geographically, establish the technological power of the company. Four elements, and you can then discuss about what is more important than the other but nobody was able to discuss about what is the level of urgency. Number one, profit, number two, product, number three, we need to be in the right spot, in the right market and number four, establish the technological power and the brand power of the company, okay? When people understand that, it took some time. Why? Because you know it’s not obvious that the guy working in the plant or somebody working in the sales force in the United States or somebody working in the logistics share the same vision. First, they need to share the same vision. Why are we going to do all these efforts? Why are we going to work so hard? In the case of the country, why I need to pay more taxes? Why I need to work more? Why I need to have to afford lower level of power, et cetera? I need to understand why. If I don’t understand why, I’m not going to give the best I can in order to re-establish the situation. So understanding, aligning people behind this vision so when you start acting, you’re going to have all the power with you. I mean the whole company or the whole country is going to be aligned with you in order to re-establish it. And there’s one thing, you know, I learned about Japan and frankly, the tsunami and the earthquake is another illustration, is when you clarify for people the priority and the vision, you know, Japanese workforce or Japanese people are second to none into the speed and the depth of execution and realization. Second to none, okay? But if you want to get that, you need to make the effort about what is the vision, what are the priorities, why I’m doing that. If you do that, then the reward is going to be huge. Why? Because people execute very quickly. I mean as you know very well that in workforce, it’s extremely disciplined, extremely engaged, extremely loyal, ready to go. That means there is a camaraderie in Japan in the workforce which is exceptional. But in order to make this working for you, people need to know, okay, what do you want to achieve? I need to understand where we’re going, I need to understand what’s in it for me or for my company and this is absolutely fundamental. So if we move to Japan, today what you hear is what’s the road map?
What’s the roadmap, okay? What’s the vision, what’s the roadmap, what are the priorities? Okay. Now the priority that is obvious is recover Japan from the tsunami. Very good, it’s very clear. Okay. And after, for what? What do you do after? What are you going to do about the demographic decline? What are you going to do about the deficit, how are we going to resolve the deficit? And now if you solve the deficit for what, for what? So I think, I mean, seen from my point of view knowing Japan for 12 years now, living in Japan, I think in order to unleash the power of Japan, there is a need for a clear, not very sophisticated, not very complicated, for a clear roadmap with a clear vision and clear priorities. Whenever this is done and there is a consensus on this, I think the recovery would be extremely fast, extremely fast.
So you’re an immigrant.
What do you think, should immigration play a role in this longer term, the population decline issue?
You know, I think what is important that it’s not so much that solutions from outside or if I work in other countries need to be implemented in Japan. There are many, many solutions possible for the demographic decline, many solutions. What is important is what is acceptable for the Japanese people, that’s the most important point. I mean you cannot come with an artificial solution which worked in other countries and say, okay, how about, why doesn’t Japan implement this? It doesn’t work. You need, you know, people know the problem, this is the priority, we need to fix it, what other different solutions and then try to see what is acceptable for Japan. What is acceptable in function of the Japanese culture and the Japanese acceptance? And then whenever you have it and there is a consensus about it, just implement it.
Let’s go back to the tsunami for a minute because you said the recovery you think will be faster than people expect. So where do you at Nissan now stand in terms of your post-production or post-tsunami recovery versus your production levels before the tsunami? How far back are you and when are you going to get back?
My own experiences in Japan are systematically the same. Always a little bit frustrated one, something happened about, you know, it takes some time to align people, okay? But then always amazed by when you align people, how fast the recovery takes place. It is systematic, I’ve seen it through the turnaround of Nissan, I’ve seen it through the financial crisis, I’ve seen it through the tsunami. At the beginning, you know, aligning, making sure that the management’s going to take a position where priorities are clear, the roadmap is clear, et cetera, takes some time, okay, takes some time. But then, after this, when it’s done, always surprised by how fast and how deep the recovery takes place. You know, when the tsunami hit on the 11th of March, all our plants were stopped, all of them.
So you were down to zero?
Zero. Production stopped in Japan and it’s stopped for many weeks. That means we did not produce one single car, you know, for many weeks. Our capacity or production in Japan, just for your knowledge, is about 1.5 million cars a year, which means when you stop making cars, there’s a lot of people who have nothing to do, etc. Okay. I can tell you today that we are, if not at, at least very near normal production.
Very near normal production?
Yeah. I mean—
You did not expect it that sooner, obviously?
No, no. We said we’re going to be in full production, unrestricted production in October. That’s what we announced when we came with our financial results in 2011. Now, today we are very near normal production. Not unrestricted, that means there are some engines which are still lacking, there are some versions of cars that we cannot produce. So we are shifting some cars from one model to another, from one color to the other, from one engine to the other. So we have some restriction on production. I’m not saying that we are at normal production because we have still some restriction. But in terms of volume—
Yeah. In terms of volume, we are approaching normal production which frankly, two months ago, we would have never considered. We would have never considered. That by the end of June, we will be approaching normal level of production. And again, this is taking place today. Tomorrow, the company officially will put the forecast for the fiscal year 2011. You know, when I said, when we announced the financial results in the month of May for the year, we said that our sales in 2011 will probably be higher than in 2010. And everybody was stunned by saying, you know, “You’re very optimistic.” Well, we’re going to show you the numbers tomorrow. It’s significantly higher than 2010.
Yeah, you will see the numbers tomorrow. It’s significantly higher than 2010. But now we can say it because we have analyzed the situation of all our plants, we have analyzed the situation of all our suppliers, we have assessed, we have assessed the situation. And all of these come to the same conclusion. Again, at the beginning, you know, aligning, understanding, putting the road map takes some time. But then, when you come to execution, Japan moves very fast.
You’ve talked in the past about long-term commitment to the production of at least one million vehicles a year in Japan?
You have the currency going against you.
You’ve obviously been able to bring your production back, but why is it important for you to produce one million vehicles a year in Japan? What is it about the Monozukuri? What is it about the whole meaning to Nissan of this production level?
Yeah. Look, Nissan is a Japanese company, that’s number one, with a global reach. Okay. So when you’re a Japanese company, the first reaction of people working in Japan, whenever we’re talking about our own executive or our own workforce or the shareholders who are Japanese or some of the shareholders who are Japanese, is yes Nissan is being successful, that’s great. What’s in it for Japan? It’s a normal question. What’s in it for Japan? I mean, if the Japanese companies are extremely rich and growing and doing very well, but if the country do not see any benefit from it, what’s, you know, why should I support this company? So there is a fundamental question about every company has its own roots, has its own belonging, its own DNA, Nissan is Japanese, and it’s very important for us that the growth of Nissan in a certain way benefits also Japan. And there are some commitments to the base of Nissan which is Japan, and will always be Japan. Okay? That’s very clear. So the main preoccupation of our own people is, okay, we’re competing globally. We are developing plants in China, in Thailand. We’re going in South America and the United States, very good. But at the same time, we are afraid that we are hollowing Japan. We’re taking all the substance out of Japan. So, you know, so people are a little bit in a situation where we say, “Yes, we are very happy that Nissan is doing well.” But if this means Nissan is leaving Japan or Nissan is less Japanese, we don’t like it. So what we are doing is we say, “We are not leaving.” That means our home base is important. We want to be competitive in Japan. Our roots are in Japan. And, but this is, if you don’t give some kind of clear commitments, it doesn’t mean anything, and we just say, we said, “We will continue to produce one million cars in Japan.” We will. We’re going to fight for this. Well, it’s not going to happen by itself. We want to make sure that our production in Japan is competitive, that the cars produced in Japan can compete in Japan and outside Japan. So it requires a lot of efforts from our Monozukuri. The first and most important element of this pledge to say we’ll build at least one million cars in Japan, is to say, “We’re a Japanese company. Our base is in Japan. We’re going to fight in Japan. And no matter what the success of Nissan globally, Nissan will continue to be rooted in Japan.” This is not valid only in production; this is valid also for our engineering. That means our main base of engineering will continue to be Japan even though we are developing engineering bases in China, in the United States, or in Europe. It’s very important because, you know, at the end of the day, what you want is your people to be aligned with your strategy and you want them to support your strategy. Okay? How am I going to support a strategy which goes against my interest? Or is going against my sensitivity or my own culture or my own country? I’m not going to do it. I’m not going to do it. So in a certain way, you need to find what is the common ground which allows you to be competitive and at the same time to reassure your base that you’re going to stay here and you’re going to develop here and you’re going to, as much as possible, prosper here.
Let’s shift the conversation now to the global economy, which is, the headlines that we’ve produced on the Reuters wire everyday are a little bit scary, if you will. I mean we have the Greece situation and the potential impact on the Euro zone, potential for a hard landing in China, the budget talks of the United States. Are you worried that the, maybe not the 2008 situation, but a global economic slowdown, a double dip recession perhaps is a danger right now, maybe even a likelihood?
You know, I never believed into the scenario of a double dip.
I never believed in it. I don’t believe it today. I think it’s obvious that after the financial crisis, everybody was foreseeing, and I think it was realistic, that the recovery will not happen in a linear way. We’re going to have two steps front, one step sideways, two steps behind, three steps in the front. It’s going to be a little bit chaotic before we come back to growth. And that’s exactly what we’re seeing. You know, one month ago, a lot of optimism and the market goes up; two weeks after, it’s a disaster. One day, we say, “Okay. Europe is back.” And then three days after, there is a tragedy. I mean we are seeing the crab movement, you know, one to the right, one to the left a little bit. I mean it is expected. And I think we’re going to see this until we see a clear recovery. Obviously, nobody knows what the future will be like. But my fundamental feeling is we’re not going to a double dip; but, at the same time, the recovery clearly did not happen yet. I mean in our own industry I can tell you, 2010 for the car industry was a record year. And 2011, even with all the problems we face, is going to be another record year. So there was never a year like 2011 where so many cars were produced than sold. And even people are saying, you know, what’s going in China during the month of May, the sales of passenger cars continue to grow in China. And I can tell you even the month of June, from the statistics, the sales of passenger cars continue to grow. Commercial vehicle, large truck are going down for a very simple reason, there are a lot of incentives which were on the table for people to buy. When you stop the incentive, obviously you’re going to drive the market down. So I am not, personally I don’t believe in a double dip even though I recognize the fact that we’re not on this boulevard of growth that everybody is hoping for.
So what do you think that, I mean not a double dip but some more chaotic sort of path toward recovery?
Yeah. I mean, and obviously the press is playing its role into-
We’re supposed to play our role.
Exactly, beefing up any event into it’s a drama or it’s this or it’s that. So it’s accentuating a little bit the crab movement, you know, one day on the right, one on the left, et cetera. It’s a little bit normal. I am fundamentally pessimistic- optimistic on the fact that we’re going to get to the recovery. I don’t think that, you know, I think the emerging market will do well. I think the US economy will recover even though it’s not going to be near. And it’s going to just take- we’re going to have to be patient. It’s going to take a little bit of time. I can tell you, the Japanese car manufacturers, if it was not the unfavorable exchange rate, would be doing record results this year.
So it’s the exchange rate that’s the issue.
I mean this is a main handicap. That’s the main handicap in terms of profit, in terms of profit. But even in terms of growth, because on the exports, you’re competing against other car manufacturers who don’t have this handicap. So it’s limiting your power to expand. But overall, the industry’s doing very well. And 2011 is going to be another record year. It’s going to be a record year of sales for most of the Japanese makers, and it’s going to be a record year for the industry in terms of total volume sold and produced.
So Carlos, you know, two years ago the United States’ auto industry went through this enormous restructuring that was really orchestrated by the Federal government. GM and Chrysler of course went through bankruptcy. But in Europe, the authorities really have a different attitude toward industrial restructuring there. It’s more about preserving jobs we have now; sort of delaying what perhaps would be a necessary industrial restructuring. Can you sort of compare and contrast how the governments in both places have approached this issue?
Well I think in the US, You can understand what happened by reading the book and the documents that Steve Rattner, who was at the heart of the intervention of the US government in General Motors and Chrysler, he said very clearly the only reason for which the government intervened in General Motors and Chrysler were jobs. That’s it.
Okay, that means, it’s jobs. They didn’t want to see 1 million, 1.5 million jobs disappearing in the United States. And frankly, I think it would have been the same reaction from any government, that it’s not about how important is the industry by itself, it’s how much jobs are generated or turned around in this industry. And politically, you just cannot give the impression you’re doing nothing to preserve these jobs. And frankly in Europe, you had exactly the same attitude because when the crisis happened in 2008, all governments, all of them, without any exception, at different timings though, intervened to support the industry not because they considered that the industry has anything critical or strategical but because of the number of employment, direct and indirect, that this industry generates. Okay. That means all by making funds available, all by, you know, supporting through incentives, the markets, everything was done in a different way. But the fundamental point and the common point is the car industry is an industry which is extremely important in terms of jobs. And that’s why it becomes a very political industry where nobody’s going to just let your industry disappear because of that. Okay.
But the difference was that the United States government said, “Let’s restructure the manufacturing capacity. Let’s take capacity out of the system.” That really hasn’t happened yet in Europe to a major degree. So that’s the big difference.
It is true. It is true that restructuring has taken place in the United States. And you know, some plants disappeared, employment has been destroyed even though it could have been much worse without intervention.
It could have been far worse, right?
Without the intervention of the government, where Europe has been more reluctant and we’ve seen it during the GM episode in Europe that no government wanted to let go any one of its plant or any restructuring and was ready to pay the price in order to maintain this activity in the country. Yes, this is the fundamental difference between the United States and Europe. It’s a fact.
Anything that’s going to change that or you think that’s just going to continue?
I don’t think it’s going to change.
No, I don’t think it’s going to change. I mean let’s face it, that means-
It must be frustrating to you, though.
What, look, we don’t choose the rules of the games. We don’t. That means we are in different countries. Every country and every region has its own rules. It’s not up to us to say I would love to play by my rules. You don’t you know, you don’t. In Europe you play with the European rules, In China you play with the Chinese rules, in Japan you play with the Japanese rules, in the United States you play with the American rules, and that’s it. The question- in fact it’s not only on us, it’s on us and on our competitors. And our role is to make sure about how can we maintain a very vibrant company even we are facing very different situations from one region to the other.
We’re going to go to questions from our audience soon but I do have, you mentioned China. What about electric car production there? What about building the Leaf in China? Can you give us any thinking about or insight to what your thinking is on this issue right now?
What, you know, the, you know, if you open the box of the electric car then we’re not going to discuss anything else during the rest of the meeting, so I’m going to try to limit myself only to China. China still did not officialize the policy toward electric cars. They didn’t yet. They’ve taken some decisions in some cities and regions, but the official policy has not been made official yet. So what we said is obviously, we will launch electric car in China, obviously. But before launching it, we want to know what are the rules. It’s the same thing. With rules that mean, is China going to put incentive for the consumer, seems that the answer is going to be yes. But who’s going to be benefiting from the incentive, but do you have to be a Chinese brand in order to benefit from the incentive versus your own brand. Are you going to have, are you going to be able to produce batteries in China, under what condition. Is the 50-50 rule- I mean there are a lot, you know, the carmakers in China cannot operate in China without being in a joint venture – 50% for you and 50% for your Chinese partner. That means does this apply to batteries, does this apply to the new technology we’re going to be bringing. There are a lot of questions which are still not officially answered though we have some, you know, some hint, but the stakes are so big that you cannot afford to go for massive investments without knowing exactly what are the rules. We are expecting this. And I think this is going to happen hopefully around the summer of this year. But we have the intention to go with the electric car and this new technology to China because the Chinese believe into the electric car, they need the zero emission and every single sign they are giving is they’re going to support it heavily.
We’re going to open this up for questions now and I think the first thing to do is to begin with, do we have any questions from, electronic questions, Abi, that have come in?
We do. We have a couple of questions from our online.
These are online questions.
Online questions. One from somebody called Trombone, I don’t know if we should take questions from people who don’t identify themselves. But anyway, here’s one question which came to our site. What do you think Nissan needs to do to exceed, it doesn’t say production or sales, exceed seven million in 2015. I hope that means something to you, exceed seven million in 2015 and what visions do you have for continued growth after achieving that?
Okay. Well you know, anticipating on the midterm plan that we’re going to announce next week which is I mean the company has grown a lot. I mean Nissan in 1999 used to sell about 2.4 million cars. Today in 2010 we sold 4.2 million cars. We had a tremendous growth and we’re going to go for another period of growth and the reasons for which we’re going to be growing is we have been very aggressive in establishing our self in developing market. We have today, let’s take the four main emerging markets. Russia, we have a plant in Russia which is full, St. Petersburg, and we signed an agreement with AvtoVAZ which is a local Russian car manufacturer to be able to use their plants to produce Nissan car and it’s going on. Renault-Nissan and AvtoVAZ today hold about 40% of market share in Russia. So I think this is, and Russian market is going to expand so I think we’re well-positioned to become the number one Japanese brand in Russia. In China we are already the number one Japanese brand. We used to sell 90,000 cars at the beginning of the year 2000 and now we are at more than one million cars. And we are aiming at 10% of market share. This is also on, okay, we built a new plant in India. We have less than 1% market share in India but we have a 400,000 cars capacity being built in Chennai. The cars that we are producing there are having a lot of success from the first sales so we are developing in India. You know the Indian market today is 2.5 million cars but there is a consensus that this is a seven or eight million car market within the next 10 years. So there is a tremendous growth taking place in India and again we need to position ourselves in order to catch this growth. Brazil which is the fourth element, we’re going to be making some announcements about Brazil within the next weeks to accelerate our growth in Brazil so I’m not going to mention it today. But we are expanding in Thailand, we expanded in Indonesia. There are a lot of markets where we have made massive investments and now it’s time to grow with this market. That’s the first element of growth. Second element of growth is on top of the new technology with the electric car and you know that I’m very bullish about zero emission cars, I’m not going to even mention that. But we have a new platform of small cars we call the V-Platform which is heavily localized, extremely competitive. We sold in 2010, 100,000 of these cars in the beginning but the objective is one million cars in 2015. Why, because obviously, small car, very competitive, very localized are going to be the forefront of your offensive.
But these are conventional powertrain cars?
Are these conventional powertrain cars?
Conventional. These are conventional. So this is on top of this. Plus the development of Infiniti, you know, the luxury brands are now a big development and particularly luxury brands are being tweaked towards emerging markets, for example in China luxury is different. People like long wheelbase cars. They like cars with smaller engines. So we are adapting our offer in order to benefit from the development. So there are so many avenues for development that I’m not so worried about, you know, how the company is going to grow and develop. We want to make sure we’re doing it in a disciplined way and making sure that it’s not only a question of volume and quantity but also you’re building power in your brand and you’re building power in your technology.
Another question from on-line before we go to the audience?
From cyberspace, somebody called “Hiroshima”. In Japan, tax on cars are still too high, does Nissan have a strategy to deal with this?
Taxes, I’ll repeat the question, taxes in cars are, according to the question, are still too high in Japan.
What’s your strategy to deal with that?
Well, you know, unfortunately, we cannot act on taxes. We cannot, I mean, they are too high, they are too high, we have to deal with it. They are too high on us, but they are too high also on Toyota and Honda, and the others. No, I mean, we don’t have a strategy, which condition is, that the Japanese market is going to be booming in the next years. It’s not, it’s not. We are relatively bearish on the internal consumption in Japan, we are. And we are adapting, we are adapting to this. Hopefully, at a certain point in time, you know, there will be some measures taken to wake up, shake up the economy in Japan and shake up the consumption in Japan, and this is something that everybody wish, but you cannot plan on it.
You cannot plan on it, and we’re not planning on it.
Questions from the audience in this room now. First of all, what we’d like to do is give Reuters customers a chance to ask their questions, then we’ll open it up to questions from the broader media. So anybody here in the customers’ ranks, if you have Reuters News on your desk, which I hope you all do, please.
Thank you very much for an interesting discussion. The question is on China and the risks that surround that market. Earlier, you mentioned rules and wanting to know what those rules are before you progress. In the beginning, the rule was 50-50; now, they’re encouraging companies to start their own Chinese brands. You either read about targeting market shares for Chinese brands going forward; how do you function in that market, what do you see the risks, the pending risks for China and how foreign companies deal with that environment? Thank you.
Well, again, China is one of the, first, it’s the number one market in the world today. And between the largest market existing in the world, this is the one where the Chinese brand hold the smallest market share, I mean, it’s true. I mean, the Koreans have an immense market share in Korea, the Japanese have an immense market share in Japan, the Americans still hold a substantial market share in the United States, Europeans have a tremendous market share in Europe. When you take a look at China, the number one car manufacturer is GM, the second one is Volkswagen, number three is Chinese Chang’an, number four is Nissan. So when you take all the foreign makers, we represent a tremendous percentage of the Chinese market, okay? So the government in China say, hey, this is a huge industry, we want to try to generate, you know, a Chinese champion. It’s logical. It’s normal, we are expecting this. Is this a handicap for us? I don’t think so. I don’t think so. It’s a factor, we’re facing it everywhere. And infact we have been growing and we are very profitable. In fact, China for the carmakers today is one of the most profitable markets in the world. It used to be the United States, now it’s China. So, yes, there are some risks, but frankly the risks are so small in front of the opportunity that China represents for us. That at the end of the day, we deal with it. So, we aren’t expecting personally that there would be at least one or two global makers coming out of China, we didn’t see it yet, we didn’t see it. I mean, people are expecting this to happen, we are in 2011, still, it did not happen. It will happen one day because there is no reason that China, being the largest market in the world, it does not generate at least one global Chinese carmaker. How is this going to take place? Nobody knows. What’s going to be the company? Nobody knows. It will probably go through acquisition of pieces of other companies outside China. But at the end of the day, it’s going to happen. So I don’t see China personally as a risk. I see it as a huge opportunity, with some reasonable constraint that we’re going to have to deal with. And one of the constraints, and the government is doing everything it can, is to say, we don’t want this industry to be completely foreign to Chinese interest. And it’s logical, that means it is totally logical. So, is this going to be in handicap for us? I don’t think so. I don’t think it’s a handicap for us. Again, as long as the rules are the same for all carmakers, we’re fine. As long as the rules are the same for General Motors, Toyota, Volkswagen, Nissan, that’s fine. But I think it’s going to take some time before we see a major Chinese maker, not competing in China because this would be normal, but competing globally.
So sometime is how long, 10 years, 5 years, 3 years?
I say at least five years.
At least five years?
Yeah, at least five years. I can’t tell you if it’s 5, 10 or- but I think at last five years, unless there is an acquisition.
I see, okay.
Yeah, unless somebody comes and go and buy an existing company, you know, and this is possible. Volvo has been sold to a Chinese interest-
Yeah, I mean, these kind of things can happen with maybe a volume-maker.
I’m not going to give you names. But it can happen with the volume-maker, and then with this base, trying to establish a global champion. It is possible.
Any more Thomson Reuters customers that have questions, please? Yes sir. Microphone right over here.
Thank you very much for a creative, impressive comments for all of those things. I have one question. You mentioned that Nissan is a Japanese company, so your priority is Nissan acting for Japan, but how do you persuade the foreign employees, who are foreign managers, if Nissan is a Japanese company, to work hard for a Japanese company?
Well, that’s a good question. I think people working for Nissan in the United States or in China, or in Brazil, they have no problem on the fact that Nissan is a Japanese company and affirming itself as a Japanese company. What they want is no glass ceiling. That’s what they want, okay? If I’m not Japanese, and I am really working hard and being successful, please allow me to express myself. That’s the most- by the way, this is not a problem only in Japan, this is a problem also with an American company or a French company. People are motivated, even if they’re working for a foreign company, as long as there is no perception of a glass ceiling, okay? If there is a perception of a glass ceiling, it cannot work, because then you have a huge de-motivation, and you end up losing your best potential. Today, in the car industry, you have a fight for talent, that you know, you never write about, but there is a very big fight for talent.
You know, a great marketer is being hunted, a great engineer is being hunted. Now, Japan is a little bit protected because there is still not so much turnover in Japan. But it’s going to happen. It’s going to come. But what I want to say is I don’t think we have any problem of motivation that, you know, our team, I can tell you, our Chinese team is fired up about Nissan. They are very proud to be part of Nissan. The people in Thailand, in Indonesia, in many countries, people are very proud to be Nissan. In Korea, we have a subsidiary in Korea, and I have Koreans come in to tell me and say, you know, I’m very motivated to be part of Nissan because in Nissan, I can become CEO; he’s Korean. “Because you’re not Japanese, you’re CEO of the company, so I can become CEO, so I’m motivated”. The notion of absence of glass ceiling is absolutely important for motivation, but, I mean, if the company is Japanese, American, it’s not relevant. People are ready to work for a large company, large company, I mean, they’re going to have to gather people of different citizenships and different culture, it doesn’t matter if you are part of this culture or not, what’s important is I’m not going to have a handicap because of the nature of my passport.
You know, I’m going to be judged in function of my contribution, I’m going to be judged in function of my engagement. And if this is true, I’m going to be very motivated.
And Nissan is, I would say today, one of the most multi-cultural companies between the carmakers. So you’re going to say, yes, obviously, it’s multi-cultural. You have plenty of French people in the management of Nissan, not at all, the first foreign executives that we have after- obviously, Japanese executives are the number one population, the second largest population is British.
And then American, and then French, and then Spanish. We have many people; we have about 35% of our corporate officers made of different nationalities. Does it make it less Japanese? Not at all. I think it’s a very modern Japanese company where it’s still majority of people are Japanese, but you have a lot of people coming from different cultures who feel that they have the same opportunity than anybody else.
Anybody else in the audience, do we have any other questions. Sir, right in the front row; go ahead, please.
What is your personal motivation or your passion for taking this responsibility? I mean, you’re not Japanese and you recovered Nissan, and now you are taking this huge responsibility. So, what motivates you?
Well you know, the motivation is always the same. That means any time you can contribute to something which is worth it and you can see it working and developing, you have a tendency to give more. I mean, I came to Nissan in 1999. Nissan was not as successful as Honda or Toyota or any other carmaker. And the people in the company were desperate; they were very frustrated because they did not understand why. And little-by-little we fixed the problem one after the other. There was no profit, we built our profit. People said the products are boring, now nobody can say that Nissan products are boring, they are very exciting. The technology is gone, while we are the mass marketer of electric cars, we bring batteries and we are at the forefront of the industry. Expansion, while in many markets which count, we are today the number one Japanese brand; while 10 years ago it would have been impossible to imagine this or to bet on this. And on top of this, this is one motivation – growing, developing something which have been, for the last 12 years, going into the same direction and re-establishing its reputation and its thrust. And the second thing which is important is doing it in an environment where you’re working with another company, which is Renault, without being a merger or an acquisition in a way where you have the scale of a bigger entity without losing your identity and without losing the brand. That’s what you called the alliance. So, all of these is extremely motivating because you’re functioning, following a model which is unique because there is no other model like this; and it’s working. I mean, obviously people look at it by saying, “Yeah you can do more, you can go faster, there is not enough synergy here and there;” but at the end of the day when you take a look at the fundamentals of the company, these fundamentals have been systematically improving, always going in the same direction. And the alliance, even though not perfect, it’s working very well. People today consider that between Renault and Nissan, yes we have been for 11 years in this alliance, we generated so much synergy, we have so many corporations going on; and nobody ever heard about one conflict. Okay? I just want to remind you about the history of other corporations in the car industry, you know. A lot them exploded, others never happened. I mean, there have been recently some agreements which were signed, but there is not one single project which came out of it. So, it looks like all the industry when it goes through mergers or acquisitions or alliances, generate conflicts and at the end of the day you have a complete destruction of value; or, in order to avoid that, nothing happens. There is no project generated. And we are in the middle. We are in the middle. We are not an acquisition, we are not a merger, we are not separate, we are working together. At the same time, you never heard about major conflicts between the two companies. And we continue to generate projects. We buy together, we have common platforms, we exchange engines, we have common plants; and there is no confusion about Renault and Nissan. The products are different, the designs are different, the strategies are different, the shareholders are different, etc. So it’s a unique model, and frankly I think continuing to sophisticate this model and making it efficient, is a big motivation for me.
We’re running short on time, but we may have other questions back here. Sir.
Hello, thanks for your time tonight. Hans Greimel from Automotive News. In your opening remarks you said that every crisis like this brings lessons and an opportunity to fix something that you couldn’t have fixed before. In the post-quake era, what are some of the two or three top lessons that Nissan has learned and what can you now fix? What are you trying to fix now that maybe was on the backburner before?
Yeah. Well let me tell you, this is a great example. Even though we have been one of the car manufacturers trying as much as possible to localize production, maximum localization of production, we had a lot of resistance internally. People say, “Yeah, we understand, but we want always to do the engines in Japan and sending them to China; or the transmission in Japan and sending them to China because the quality here is better and this and that.” And we faced always a lot of resistance by saying, “No, no, no, we should go for very high level of localization in order to be competitive.” Well after the earthquake, I can tell you that there is no more resistance on localization because people understand that if China depends on a plant in Japan, you have a double problem. If you have a problem in Japan you’re going to have a problem in China. And the fact that we have localized a lot of our production is one of the explanations for which we are recovering much faster from what’s happening. That’s one example.
Second example, we discovered through this crisis that we were paying a lot of attention to rank 1 supplier, eventually rank 2 supplier. But most of the problems we are facing are coming from suppliers which are ranked 3 or ranked 4. Why? Because some of these suppliers in rank 3 and rank 4 that we were not seeing happens to be, have a monopoly on one particular part. And on top of this, not only they have a kind of monopoly on this, but on top of this there was only one plant. Okay? So, this plant being down, we’re stuck. We found ourselves – not Nissan, but all the industry – has been stuck by the fact that we discovered that some components, and particularly electronic components and chips, were all sourced from one particular company from one particular plant. And when the plant collapsed, we saw ourselves unable to do some particular engine or unable to assemble certain cars, and we’re not going to do it anymore. So now, if you are the only suppliers for any particular good, we’re going to ask you to have at least two production plants and not in the same area to make sure if there is any- I mean, today we’re talking about earthquake in Japan but tomorrow it can be an earthquake in China, or it can be a flood in Thailand. So, you don’t want to be in a situation where you have one supplier in one plant producing everything you need, because no matter what, nobody can guarantee that you’re not going to have a surprise at this particular level. So, if there is one supplier, we need two plants. If not, we need two suppliers. These are certain things that we are learning and we are acting on it. And by the way, it’s not only Nissan – the whole industry is working on it. And there are many other lessons like this which are going to be very useful for after the quake.
So, Hans asked a question about learning from crises, learning from experiences and that sort of thing. Let me just ask you a follow up on that if I can. You had this incident at Renault earlier this year where you had the false accusations against certain employees, you apologized for that, I’m not going to ask you to review that; but what lessons did you learn from this episode?
Well, you know, the lessons that you learn from every episode like this is from time-to-time you don’t pay too much attention- I mean, we are, as a car manufacturer, we have a tendency to pay a lot of attention to engineering, to technology, to manufacturing, to Monozukuri, to quality, etc. but we don’t pay too much attention to the support functions. Security, accounting; we don’t pay too much attention. That means we don’t pay too much attention at the top level I’m saying, because the top level is absolutely completely driven by what’s critical for our business.
Yeah. But the lesson is from time-to-time your worst problem may come from some area that you’re not paying too much attention to, and all of a sudden something develops and you don’t react very quickly, you don’t pay too much attention, and you pay a very high price. That’s one of the lessons. And in the case of Renault, which is in the case of the security system, we hired some of the best experts in terms of protection and security, and they are helping us reshuffle completely the security system of the company to make it a benchmark in France. So this is one of the lessons learned. Pay attention to everything where you may have a surprise, and even though it’s not in your core area of activity, you need to make sure that you are at a level of robustness which is enough.
We have time for one more question. Is there anyone else in the audience that wants to lob a question in here? Okay. We left them speechless. Exactly. Well Carlos, thank you for joining us here at Thomson Reuters, it’s been a great discussion and good luck with your help in rebuilding Japan and with the company.