By on March 22, 2008

ghosn.jpgAs sure as night follows day, you can count on seeing the following after news of an automaker in trouble.  “___ is in talks with Renault/Nissan CEO Carlos Ghosn.” The other thing you can count on: these talks won’t amount to a hill of beans. At most, the result will be some sort of technology-sharing venture in some peripheral market or an engine deal for a car you’ve never heard of. Why all this sound and spin signifying nothing? Because the Brazilian-born auto exec knows which side of his bread is buttered. 

The biggest problem facing Renault Nissan (R/N) isn’t failure; it’s their lack of “success.” R/N’s operations are profitable, their factories efficient, their cars respected. All this is true, but… while both companies’ model lineups contain plenty of fine cars, there are no “segment-busters.” Worse, these R/N machines aren’t languishing in second place; they’re forgotten cars. 

Nissan’s USA ops are a classic example. The Altima and Sentra are not even mentioned in the same breath as Accord/Civic or Camry/Corolla, sporty performance or not. The Quest is buried deep in the minivan heap. Nissan’s crossovers are a mishmash: two-row vehicles in two sizes (and price points) with no true three-row offering.

Nissan’s American SUVs tell the same tale: competent enough, but lost in the shuffle. The recent meltdown/price war in pickups hit Nissan even harder than the beleaguered Chrysler Corporation. The Titan’s profits evaporated. Toyota, the new new kid on the block, managed to shift four times as many Tundras as Titans.

And that’s where it hurts. If you were to boil Nissan’s corporate motto down to two words, they would be “beat Toyota.”

If you were allowed a caveat it would be “especially in Japan.” Historically, chasing down Toyota on its home turf has been the doom of ambitious Japanese makers. Mazda is no longer an independent automaker (part assimilated by Ford) because they tried to fight Toyota in Japan; Suzuki’s making a push right now (film at 11). Fighting Toyota in every niche (and keeping enough capacity to match them) almost killed Nissan ten years ago.

Ghosn is still hailed as a savior and great business leader in Japan for pulling Nissan’s fat from the fire. But it’s important to note that most of Ghosn’s miraculous “fixes” were nothing more than cutting Nissan down to its actual size, jettisoning their unrealized ambitions. And just because Ghosn made Nissan see sense– in the short term– doesn’t mean that Nissan’s old guard have to like it. To trail Toyota can be borne. To trail Honda (the Taro-come-lately of the Japanese makers) is unacceptable.

This is the rub at Renault/Nissan: while they’re holding their own in terms of profits and market share, their natural rivals– both above and below– ARE gaining ground. 

With organic growth stuck resolutely in neutral, Ghosn understands that there’s only one other path capable of placating his Japanese taskmasters: adding another “partner” to the firm. After all, it worked before. Hence the abortive merger talks with GM— which ultimately served to consolidate both GM CEO Rick Wagoner and Ghosn in their respective executive suites. Hence murmurs of a Chrysler conglomeration.

Without delving too deeply into Ghosn’s Machiavellian machinations, it’s highly doubtful that the Brazilian-born auto exec is doing anything more than a head fake when he speaks of cooperation. Ghosn is smart enough to realize that trying to recapture the “magic” of the Renault/Nissan merger would put the company on a hiding to nowhere. After all and again, it wasn’t THAT successful.

IF the Nissan – Renault merger would have been wildly profitable, leading to a true Toyota-rivaling corporate colossus, Ghosn would now be untouchable. If the R/N merger had been an abject failure, he would have been axed. Stuck in the middle, Ghosn keeps the acquisition pot boiling. Removing him would kill the [theoretical] deal that would deliver the last bit of wanted size.

And if such a merger should happen, Ghosn's the only logical person to handle the change-over. Clearly, demonstrable, he's the consummate integrator. Other auto execs are sharper with numbers (though Ghosn's no slouch with financials). Others have closer ties to product (though Ghosn is quite the car-nut). But it’s doubtful any other auto exec could have held two such disparate automotive companies together while keeping them out of each other's hair. This is, was and will be Carlos Ghosn's genius.

As long as Nissan and Renault’s owners dream of expansion, Ghosn’s position is safe. The moment Nissan or Renault believe that Ghosn can’t fulfill their long-term aspirations, they will begin the process of finding someone who can. It is therefore in Ghosn’s best interest to fuel rumors of mergers that are not in the best interest of Renault Nissan or its [supposed] dance partners.

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19 Comments on “Carlos Ghosn’s Merger Mania...”

  • avatar
    Paul Niedermeyer

    Interesting editorial, and some good points and food for thought. But I’m not sure I agree with this premise:

    “As long as Nissan and Renault’s owners dream of expansion, Ghosn’s position is safe.”

    I have no reason to think Nissan and Renault’s owners dream of expansion. The “owners” are the stockholders, and expansion by acquisition has become almost taboo, given the DXC and BMW/Rover debacles, not to mention Ford/Jag, Saab, etc…Shareholders want appreciation, and organic growth with good cost controls is the name of the game these days.

    R/N have been relatively profitable companies, and the owners/shareholders are probably fairly happy with that. But Ghosn is intrinsically restless. Whether it’s ego, or the thrill of the hunt, who knows. And he has made some good deals for joint production/cost sharing. I think Ghosn’s biggest risk is in actually trying to do a large merger/acquisition, which his owners might not approve or be happy with.

  • avatar

    Paul Niedermeyer : Interesting counter-theory: a 180 degree reversal of the Mr. Dederer's proposition. I can see the logic of both perspectives. While I certainly hope that the days of mega-mergers are dead, and thus appreciate your view of Ghosn's merger mania as reflective of personal (rather than corporate) ambition, there's no underestimating the megalomania of the people behind the people in the car industry– even when they aren't German.

  • avatar

    With RF’s warning about megalomania in mind, I have to agree with PN. Aquisitions/mergers have mostly been failures and organic growth is now being seen as the way to go. If I were a R/N stockholder I’d want Carlos to knock off the merger talk.

  • avatar

    I don’t think a merger is necessary for Nissan to take off. As the article clearly makes out, Nissan cars just aren’t great – they can make good, dependable, fun cars, but the just aren’t “great.”

    With the GT-R release and a new Z (apparently) on the way, I think that Nissan’s next move should be the SHIFT_ image. How about SHIFT_sports? They have a foot in that direction already; some older Nissans were known for being cheap sports cars, while cars like the Altima are regarded as “sporty” family sedans (which, ironically is supposed to be the Maxima’s spot, but that’s another story).

    Instead of offering one of every type of cars in the market, Nissan should focus more on growth in their own department, thus pushing the SHIFT_ persona Nissan is supposed to represent.

    Release a Silvia replacement should be the first step. With the 370Z around the corner, the GT-R release, and the whole 4DSC the new Maxima is supposed to be, they should SHIFT_ into the sporty division. Make the lower-end sports cars get excellent fuel economy, and get rid of the SUV clutter!! xterra, rogue, murano, v6 pathfinder, v8 pathfinder, armada? Just too many! Especially with gas how it is and the downward trend of gas-guzzlers, Americans are going to need something.

    We all know how it works – if we can’t have the biggest cars, we need the fastest. Americans like focus, and a Sports focus is desperately needed right now.

    Nissan has the resources.. and instead of offering a Coupe Altima, the Skyline (G37) should be offered with two different engine choices – an economic (slow, high MPG) I4 or detuned 3.5 V6 and the larger 3.7. Make the Murano more of an FX. Bring the G35 down as the smaller of the 3 big cars.

    They have plenty of directions to go, but I firmly believe that they have more of a chance of taking the Sports crown than any other manufacturer out there. Let Toyota be the “bland” brand (comfort, economy) – they seem to be doing it fine. Pick a direction and push the whole line-up to follow suit. Make a REAL mark with the SHIFT_ marketing.

    ..and maybe focus a bit more on build quality – I have a 22 year old Nissan in my parking lot with OEM everything, down to the clutch, and she starts daily. My family just traded in an ’89 240sx that still rode on railroad tracks, no squeaks or rattles. Unfortunately, the new vehicles aren’t matching up; my ’04 Nissan SUV was in the shop about 14 times for squeaks, rattles, leaks, window motors, etc. My ’06 Nissan truck started following the same path, plus brake issues.. might be worth looking into ;-)

    :: off soap box ::

  • avatar

    Japanese government always opposes mergers with foreign companies and will do everything to stop it. renault ,from other side, has lower quality and reliability standards, thus Nissan wouldn`t use their parts. Although renault gives access to all the PSA group bin, i don`t think Nissan would be interested. The only interest I see would be Joint venture for a diesel factory, or Nissan`s green card to shove their platform underneath Renault`s next SUV. By the way, Renault has a poor choice of engines, the biggest their own engine is still 3 liter v6, that hasn`t improved much ,cranking out pretty shy 214 hp. Maybe Nissan is targeting F1 and that`s why they need a civil union? You never know…

  • avatar

    Paul Niedermeyer :
    The “owners” are the stockholders, and expansion by acquisition has become almost taboo, given the DXC and BMW/Rover debacles, not to mention Ford/Jag, Saab, etc…

    Paul — Theoretically this would seem to be the logical conclusion from the fallout of the merger craze of the last 20 years, but I’m not so sure. The folks in charge of these mergers had plenty of examples of the folly of their ways and went ahead anyways.

    I’m sure those folks had heard of British Leyland — an entire industry merged and now no longer with us. Or the British motorcycle industry, once mighty and then merged and stagnated into oblivion. Both of these merger crazes started in the 1960s.

    I’m not seeing the true leadership required to turn away from the ego boosting treat of expansion by acquisition. The US companies can’t afford it (and are trying like hell to run away from their past blunders) but I could see Ghosn going after someone. R/N’s position as forgotten-but-profitable company puts them in exactly the position where a merger could seem like a good idea. Growth by steady, sustainable improvement (ie the Toyota and Honda way) is slower and harder than just buying your way in.

    Would the stockholder/owners be willing to wait for a 7 – 10 year plan to play out — or would they demand stock price increases right now?

  • avatar

    There are a few inaccuracies in this editorial:

    1. “And that’s where it hurts. If you were to boil Nissan’s corporate motto down to two words, they would be “beat Toyota.””

    This used to be the case of Nissan, but in the “Ghosn era” (which is was we’re talking about) this is false. According to the autobiographies “Shift” and “Turnaround” it was keeping up with Toyota which got Nissan into the mess which saw them meet up with Renault. Since Mr Ghosn came he’s beaten that out of Nissan (for reasons which I’ll come to later).

    2. This editorial talks about Ghosn wanting to merge with other companies and the “Renault-Nissan merger”. Carlos Ghosn doesn’t believe in in mergers, he has consistenly said that they destroy value*. Also, Renault and Nissan DIDN’T merge, they formed an alliance. Yes, they set up “Renault-Nissan B.V” but that was just to merge offices and paperwork (i.e purchasing etc) the companies remain as 2 separate corporate entities*.

    The reason why Ghosn’s dream is stuck in netural (mixed metaphors, I know) is because of Ghosn himself.

    I have said before (and continue to say) that Ghosn did a brilliant job in his swift and savage turnaround of Nissan (and Renault). Like Mr Dederer said, he basically cut Nissan down to the size it should have been and jettisoned any “non-core” subsidiaries (i.e the $200m stake in Fuji Heavy Industries). Also his management of his management is excellent (Nissan recently missed a sales target and Ghosn said “You’ve missed a sales target? Forget about your bonuses!”). No golden parachutes there….

    But Ghosn’s new mantra for Nissan and Renault was that cars shouldn’t be made unless they make a substantial profit. They won’t make cars for technical exercises (i.e Bugatti Veyron). This explains why Ghosn eschewed making their own hybrid technology and licensed it from Toyota. They weren’t prepare to go in a new direction if profits weren’t there.

    And it is this consistent hunt for profits which is causing expansion to stall. Since Renault or Nissan won’t make cars which “break the mould” or “dare to be radically different” they’ll always make cars which are “safe”, “steady” and, above all “profitable”.

    Another reason why his continual hunt for profits his sometimes counter productive is the pressure on engineers and accountants to use cheaper materials. It surely can’t be a coincidence that since Carlos Ghosn took the helm, Nissan’s reliability is going downhill?

    Also, because CUV’s and SUV’s bear more profit than cars, we end up with illogical car line ups. The line up from Nissan UK is:

    Micra: small city car.
    Note: Small CUV.
    Qashqai: big CUV
    Murano: small SUV
    X-Trail: Medium SUV
    Patrol: Medium SUV
    Pathfinder: Big SUV
    Navara: Big pick truck.
    350Z: sports car.

    If you wanted a small hatchback (i.e Toyota Corolla or Chevy Cobalt) or a family sedan (i.e Honda Accord or Chevy Malibu) Nissan can’t help you!

    That’s why, under Ghosn’s tenure, Nissan has slipped to Japan’s number 3, whilst maintaining healthly profits, whereas, Honda leapfrogged them and maintained better profits, because they dared to do different things.

    Now in Ghosn’s floundering, organic growth isn’t coming so, they bought a 25% stake in Autovaz**. Now Ghosn is seeking growth, no matter what means. This is always bad, growth by acquision? Didn’t do Ford and GM much good……

    * =

    ** =

  • avatar
    Point Given

    Ok, I’m a Nissan guy. I really dig the machines.

    I caught Ghosn on a late night Canadian business channel the other night. He, like most CEO’s, spoke in broad terms about growth coming from China, Brazil and India. He said that the north america market is continuing to grow, particularily with the Infiniti line. (I’m paraphrasing of course, but that’s the gist of it)

    I read a couple books on the merger, and both were very carful to point out the effort that was put forth pre and post R/N merger. A lot of time was spent at lower levels to see if the companies were compatible, and could meld together. This tenative, cautious information seeking is a reason for the success that both have had.

    I see Ghosn running around rumored to be talking to anyone that makes a vehicle, but I know that the CEO meeting is very preliminary. If it doesn’t start well there then no point unleashing the lower level minons to see if a merger would actually work or not.

    Now the rumor that he’s taking a peek at Chrysler isn’t suprising. Given Chrysler’s ownership history the corporate culture has to have taken a bit of a beating and may be more malleable and open to the French/Japanese. If effort is spent at the lower levels I’d say a merger has a chance of succeeding.

    If a merger goes ahead, regardless of the corporate culture due diligence aspect, it’s a zero win game, a zero synergy game and will result in Chrysler being pawned off on some other automaker in less than 5 years.

  • avatar
    Gardiner Westbound

    Perhaps God smiled when they put our Nissan together. Our Infiniti was delivered in flawless condition and has yet to develop a single squeak, rattle or other issue. The dealer is excellent.

    An Acura developed three issues including one that left us stranded. We no longer patronize the dealer. A Toyota had two issues. The dealer was average. The worst of these issues was a walk in the park relative to domestic brands and their pirates dealers.

  • avatar

    Nissan is in an odd spot, but not a bad one. In North America, unseating Honda and Toyota from the top slots is a formidable challenge. I frankly doubt that it’s worth the money and effort to even try. Being a very good third-place (not third tier) import/transplant that can sell at profitable volumes may be good enough.

    In Europe, Nissan doesn’t need to be a full line automaker because to do so would be to compete directly with Renault. It would be smarter and cheaper to build the Renault brand within Europe and to niche Nissan than it would be to cannibalize each other with competing products and diluted branding.

    Mergers fail more often than they succeed, so it would be a horrible mistake to engage in a growth-through-acquisition strategy. It might be a good play for R-N to attempt a venture into the high-end market, as Ford tried to with the PAG effort, but this must undertaken with caution and the end result should be to enhance margins and gain an R&D advantage, not to dramatically sales volumes.

  • avatar
    Bozoer Rebbe

    A little linguistic note:

    M’shuga – Hebrew for crazy, insane.

    M’shuganner – Yiddish for crazy person.

    M’sh’ga’as – Yiddish for crazy stuff, crazy behavior. Used colloquially, not literally.

    Of course as with all foreign languages alternate spellings can be used and there are regional dialect differences, plus with so many Yiddish words being used by people who don’t know Yiddish the words tend to lose their original pronunciation.

    My guess is that “meshugas”, is Dederer’s version of m’sh’ga’as.

  • avatar

    If Mr. Ghosn is expecting growth to come from Brazil, he may get some, but he’s not getting any extra market share.

    When they started in Brazil, Renault was the company that proudly screamed, “we care about your safety!” and, believe it or not, they were the only car company that put air bags into all cars they sold. Being Brazil what it is, most cars sold here come with power nothing, no aircon, no power steering even. So, it’s quite reasonable that the Brazilian consumer invests his hard-earned money into things like air conditioning and power windows, and less reasonbly into alloy wheels and wings (when 50% of cars sold have a puny 1.0L engine) than stuff like air bags or ABS.

    Seeing this, Renault decided to do without the air bags. But, just when they were carving a niche for themselves “expensive-but-well-equipped” they became “just-as-if-not-more-expensive-without-any-really-relevant-extra-features-and-new-to-the-market-why-should-I-take-a-risk-on-it”. Not surprisingly their market share went from a high of 4% and growing to a very poor 2%.

    Don’t know, maybe they’re profitable at that point, though of course they aren’t. Even they know it. They always talk of getting profitable in Brazil at some later point.

    And FWIW, Nissan in Brazil is a tiny tinny player with less than 1% of the market. Everyone sees them as a truck and SUV builder, but with a desirability below that of Toyota or even Mitsubishi trucks and SUV. But with their low volumes and ourageous prices, I’m betting they’re profitable.

    ON a side note to JURISB, PSA is Peugeot and Citröen, not Renault.

  • avatar


    I thought sales of the mid-size family car class in the UK were in freefall because people are choosing premium small cars like the 1-Series and A-Class or base trim luxury compacts like the BMW 318i.

  • avatar

    I think the main issue for R/N is cracking the US market, the largest in the world. Renault, after several attempts, organic and acuisitive, has only failed. Nissan has done well, but nothing like Toyota and Honda.

    To make a go of it in the US organically, R/N needs to build the brands, cutomer loyalty, factories, dealerships, etc. that take a generation to build.

    The shortcut is to buy Chrysler (or Ford) on the cheap. The issue for R/N is that the French government — probably the largest stakeholder in Renault — is deathly afraid of inheriting Chrysler’s obligations to its unionized workforce. This is a very reasonable fear, and will limit Ghosn to cooperative agreements, rather than an outright acquisition.

  • avatar


    I really don’t think that is the case. The Ford Mondeo is selling hand over fist, Toyota can’t make the Avensis fast enough (not sure why, I can’t look at one without falling asleep).

    Not mention that the line up I mentioned is pretty much the same all over Europe.

  • avatar

    Nissan has too many ugly cars.
    Versa== Fail

    Before “Eyelashes” 5-series Gen. Every BMW looked great.

    In MK4, All VWs Looked good, if not flashy.

    New Max is a good step, but grille +heads are naff.

    More design porn on ALL cars, maybe -1pt less than Inf.

  • avatar
    Bozoer Rebbe


    I’m tickled that you edited the headline. Props.

  • avatar
    Robert Schwartz


    Andrew, was transliterating xxxxxx as meshugas because I made a comment a three weeks ago in another thread:

    “Misegos” should be meshugas.

    The root word meshuge (meaning crazy, insane; משוגע if you have the correct font, mem shin vav gimel aiyn if you don’t) is originally Hebrew, but was used in Yiddish. Yiddish is a German dialect, originally spoken by the Ashkenazi Jews (Ashkenazi is a Hebrew word that means German), which was written with the Hebrew alphabet. There is no official system for transliterating Yiddish into Latin Alphabet for English speakers.

    The most common transliteration of the root word is meshuge, although meshugge is not uncommon. The word is not pronounced mes’huge; the sh is a digraph as in shoe or ship, the g is hard, as in gas or grim.

    Meshugas (craziness, insanity; משוגעת, if you have the correct font or mem shin vav gimel aiyn tav if you don’t) is often transliterated mishegas or -goss or -gaas, but the second consonant is always a shin not a sin, so it must be sh. I think the second vowel often morphs into an e because the syllable looses stress when the extra consonant is added at the end, but it should be u. the last vowel is variable, but I would prefer an a to an o.

    Now this a matter of transliteration, and as I noted, there is no official system for transliterating Yiddish into Latin letters for English speakers. That said, I am not fond of your transliteration using single quote marks where the Hebrew alphabet often leaves vowels implied or indicated in subscript.

    The first mark is especially difficult for monolingual English speakers, who are not an inconsiderable number of readers of this site. It leaves the initial consonant high and dry without a vowel sound to hang onto and most english speakers would not be able to pronounce it.

    The second mark is more puzzling. The Yiddish word has a vav which represents a vowel sound which would be rendered with an “o” or a “u” in English. It is not a implied or subscripted vowel. The argument for using an “e” to represent the vav is that the vowel is de-stressed and is pronounced by Anglophones as a schwa. I prefer the u because it relates more directly to the vav, which is its orthographic ancestor.

    That brings to the third mark. I think what you intended for the third mark was to render the ayin as an unvoiced stop. I really haven’t heard it from Yiddish speakers (sadly all gone from my life due to their great age), and Anglophones are very unlikely to be able to render it. Using a double aa in some transliterations is intended to produce an open back unrounded vowel “a” as in father rather than an open front unrounded vowel “a” as in pat.

    I note that the word now is found in English dictionaries. None of the renderings there use a single quotation mark. The American Heritage Dictionary entry uses three transliterations: meshugaas or mishegaas or mishegoss.

  • avatar

    Get ready for the TTAC spinoff website — The Truth About Hebrew, featuring weekly dispatches under the column heading of Apostrophe Death Watch.

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