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The Renault-Nissan CEO talks about the auto alliance, electric cars and emerging markets
October 23, 20142:00PM ET
Some years ago, you took me for a ride in a Nissan Leaf. This is not a hybrid car. This is an electric car. What is your enthusiasm about electric cars? And what is your forecast for the role that they will play?
I am very enthusiastic about it. We don't have any quality problems. We don't have any reliability problems. The people who bought electric cars are very happy about it. The highest level of satisfaction between any other Nissan car or any Renault car is with the electric car. Technically, in term of product, it's a success and will continue to be a success. Where we are having a problem is the sales. And one of the reasons for which we have less sales than we were hoping for or forecasting is due to the fact that a lot of people would love to buy electric car. But as long as they don't see the charging infrastructure, they are waiting on the side by saying, "OK, you know, autonomy is not enough. Where am I going to charge my car? As long as I don't have an answer, I'm not going to be buying it." Now, we're being helped by governments because China, France, U.K., United States, Japan obviously are moving into support [for] zero-emission transportation.
But you're happy that you went for a full electric car, not a hybrid.
Yes. I mean, there is no doubt about it. There is a place and a big place for zero-emission cars. Not hybrids, zero-emission car, beside hybrids, beside gasoline engine, beside diesel engine, beside all the other technologies. This is not going be a substitution effort. This is going to be a segment which is specific for some utilization and specific for some countries who are going be particularly privileging the zero-emission like, in my opinion, China is going.
Let's talk about an autonomous car. A driverless car. You guys said you'll have one. Are you still looking forward to that?
We are looking forward, and this is coming from a very simple observation … when you today interrogate consumers and young consumers about what do you want for the future. It's a very simple question. Between the different answer you're getting, there are two main things which are attracting our attention.
They are saying, "We want more time available in general. And second, we want more pleasant time." So when you look at that and say, "Well, OK, I want more time available. I want more pleasant time." What as a car manufacturer can I do to go into this direction? People spend on earth in average two hours in their car every day. This is not two out of 24 hours, this is two out of 16 hours because I suppose people sleep on average eight hours. It's a huge amount of time. During this time, there is nothing you can do.
So if you can free some of this time, make time more available and connect the car — that's why I'm seeing more development for what we call autonomous car. Autonomous cars are not driverless cars. You are still in the car. You are in command. But we're giving you more power on your car. You can give up command whenever you want. You can take back command whenever you want.
‘We’re giving you more power on your car. You can give up command whenever you want. You can take back command whenever you want.’
Let's talk about you. It's 15 years, this Renault-Nissan Alliance. There are probably a lot of people in the world who don't really get it. Because they run as two separate companies, two separate brands. Fifteen years ago, there were lots of people who didn't think it would make sense. Take us back in time to where you were, how that decision was made to connect two completely different cultures run by a guy who wasn't inherently from either of them and what people said about it.
In 1999, when the alliance was signed between the two companies, people didn't pay too much attention to the alliance itself for a very simple reason — Nissan was in trouble. Nissan was on the verge of collapsing. The main attention was on "Is this alliance going to be able to help the turnaround of Nissan?" Then when the turnaround of Nissan was done successfully and Nissan went into a revival mode, in a continuous revival mode, then the attention shifted to the alliance. There was always skepticism about the alliance, about how two companies which are independent, autonomous, with two different executive committee, two different board of directors, two different headquarters, two different set of shareholders, how these companies can continue to collaborate as intimately as the collaboration was taking place without leading to a merger.
So people said, "OK, that in a certain way, you're going to separate, or you're going to merge." So this stability of an alliance was really seen with a lot of skepticism for a very simple reason … There was no other model like this, no other example like this. But this is a very classical problem. People think because it was never done, it means it cannot be done. Which obviously is not true. It's not because it was never done in the past that you cannot do it and have a reference for the future.
But after 15 years, I'm seeing less skepticism about the permanence and the stability and the perennity of a model by which you still keep the brands separate, the culture separate and distinct. And you can make company like this working together.
And the sign of this is we're having more collaboration. That we know Renault and Nissan as an alliance is becoming kind of platform of collaboration where we have a strategic partnership with Daimler. We have a strategic partnership with AvtoVAZ in Russia, owner of the Lada brand. We are working also with Mitsubishi. You have many, many other carmakers which are competitors on some markets collaborating with us. So this cooperation where you can be competing but at the same time you can be collaborating is something for me very important.
We have heard over the last few years that you were approached several times by American carmakers, at one point to run Ford and then, in the worst of what was going on in the American auto industry, to run General Motors. Tell me about what you thought of those.
I remember at the moment which was the most difficult [for] American industry, I said, "Well, you know, everybody's going to come back. Don't worry about it."
You did say that.
I said it. And that's where we are today. I think the American companies are back. They are much stronger. They put their house in order. We need to account with them. I think it's great for the consumer. This being said, the game or the competitive game from now on is going to be very different than the one that we have been facing in the past. We all have to adapt to it. And in our industry, the positions are never secure. No matter how strong you are today, you're never sure you're going to keep this position.
Because, as I said, this is an industry where you need both creativity, dynamism, but also make sure you're going in the right direction, which usually based on experience and a good sense about the traps to avoid. It's a combination which is not very easy. That's why, as you know, it's always a very exciting industry, because nothing is ever guaranteed.
What happens when you decide to leave Renault-Nissan? Does the succession plan involve somebody who runs both companies?
The board of each company is in charge to make sure that there is always a succession plan, and we're not an exception. We have that. Now would it be one person to manage two companies or two people with a kind of governance? It's still too early to talk. The alliance worked in both systems. At the beginning of the alliance, there was one person heading Renault, another person heading Nissan. And the alliance went through up to 2005. Between 1999 and 2005, you have two different leaders. Starting from 2005, we ended up with one with one leader. But it doesn't mean that it can work only with one leader. You may have a system with one head for each company working together under a specific governance system.
Let's talk about emerging markets. Let's talk about how you're looking at India, China, Russia and other places.
We still believe that even though, as you know, in the emerging markets the development is never linear. It's never every year you're going 7 percent or 8 percent increase. Never going to happen like this. You're going to have from time to time crisis. You're going to have recoveries. You're going to have two steps forward, one step backward or side[ways].
That's what you are seeing, for example, in markets like Brazil. Nobody was able to foresee that the Brazilian car market will go down 9 percent in Brazil in 2014 after having grown so much for the past year. But it's part of the mechanism. It's part of the hectic way find your way towards development.
But this doesn't for me change the trend. The trend on these markets are up. And the trends are up for a very simple reason. I don't even come near the U.S. where, as you know, you have 700 cars per 1,000 residents. If you go to European market, every European market is 500 cars per 1,000 residents. Russia is at 300. Brazil is at 200. China is at 100. India is at 20. Now, when you start to go to the new emerging markets like Indonesia, Nigeria, Vietnam, some countries in South America, you are at 20 or 30 cars per 1,000 residents. So there is no way you can imagine that these levels are going to stay so low.
Is there a measure? Is there a GDP per capita that signals people are ready for more cars? That you're going to see that jump from 20 to 200 or 200 to 500?
When the GDP per capita crosses $12,000 a year you start to see some accelerated move into the car industry. This is something which is a rule of thumb that you see across countries. But what we focus on are the countries with rich resources — oil, natural gas, metals, agriculture, etcetera, and large population and a good demographic — and that's what qualify the country with a special focus in term of growth.
Let's talk about India. Very interesting things happening in India. (Prime Minister) Narendra Modi was here in the United States, he got a rock star's reception. A lot of hope being put into one man to fix a lot of problems that have been going on for a long time. You are invested in India. What's your sense of this?
I'm very optimistic. First because, I think there is a lot of hope. When there is a lot of hope on the shoulders of one man, what happens is everybody has the tendency to help him. Which is exactly the kind of dynamic that you want to see. Obviously he cannot do everything. But if he has the support of the whole Indian society, they're going to make him successful. On top of what he would be doing himself — the fact that people are betting and they are believing and they want to give a hand for this to happen — they're going to make it happen.
‘Saying that there is an obvious solution would be very arrogant from anybody. I think it’s a very complex situation. But at least the remedies, we know them.
You were born in Brazil. You were raised in Lebanon. You got your education in France. You run a company based in France and Japan. You spend a lot of time in New York. You qualify as someone we can ask questions about the world.Let's start with your view of what's going on in the Middle East.
Well, it's very unstable. It's bad. It's obviously taking out of the market countries which now should be really developing, where demand can be very big, like Iraq, for example. It's a pity because there is a lot of wasted opportunity. And frankly, I think the main factor acting here is fear.
Is there some obvious solution? When you look at Iraq and Syria, you have power vacuums that are being filled by extremists. What's the solution?
Saying that there is an obvious solution would be very arrogant from anybody. I think it's a very complex situation. But at least the remedies, we know them. The first thing is as much as possible try to diminish fear by establishing a much better communication and knowledge between the different entities, which for the moment are just refusing to see the evidence. You mentioned the fact that I grew up in Lebanon. And in Lebanon, which is a kind of melting pot of religions and different ethnicities, you've seen the very best and the worst in the same environment. I mean, the very best came when there was tolerance and understanding and cross-cultural understanding and in a certain way working between the different communities.
Lebanon has been very prosperous at this period of time. You have seen also the worst, with the civil war, when — with the same communities, with the same differences — people start to suspect each other and be afraid of each other. That's what we are seeing today at the level of the Middle East.
Let's talk about Eastern Europe. These tensions between Russia and Ukraine and Eastern Europe have exacerbated already slowing economies. Are you worried about a recession in Western European countries? What are you seeing?
Well, first, I think Europe is in a recovery mode. There is no doubt about it. But this recovery mode has been put in doubt by the fact that there is divergence inside Europe about the policy to be implemented. This divergence now is taking place inside the European Central Bank, which has many choices and cannot make what seems to me as obvious choices. Because the different constituents of Europe do not agree. At least for the moment.
Actually 2014, particularly for the car industry, has been pretty good, with an increase of the sales of cars of around 5 percent to 6 percent. This is something we didn't see for a while. And it's based on the fact that it was about time that recovery takes place. But it's being blocked by the fact that every time you have a major decision to be made, you need to make sure that all the European countries are aligned behind this decision. So every time you have an important decision, if you have two schools of thoughts and two different attitudes, it's going to be a very long recovery process. That's what we are seeing. And that's what we in the business world really don't like at all.
And broadly speaking, those two schools of thought are about austerity versus stimulus.
I don't think that anybody contests the fact that there is a need for much more discipline in fighting the deficit. Nobody contests that. The question is about the mix. What is the mix that you want to do?
I don't think anybody's neglecting the fact that we need development, we need growth. At the same time, we need to fight against the deficit. The question is the timing, the magnitude of the effort which is being debated.