Share

--

--

DAVID M. RUBENSTEIN:  (In progress) -- figures in the world.  I tried to figure out a little bit, in doing some research on him, how he could possibly do this.  How can he run two separate companies as well as having four children, a wife in Paris and also make speeches like he's making today.  And I went back and did some research, and I concluded that when he was born some 53 years ago, I believe it is, actually there were quadruplets.  (Laughter.)  His parents had four children, each named Carlos Ghosn.  And said to one, you learn Japanese.  One said, you learn French.  One, you learn how to be a good husband and father.  And the other, you learn how to be a good public speaker.  Today, we're fortunate actually to have all four Carlos Ghosns here, though.  And it's my pleasure to introduce Carlos Ghosn.  (Applause.) 

CARLOS GHOSN:  Thank you.  Good morning, ladies and gentlemen.  Thank you, David, for your kind and humorous introduction. 

This is my first time to speak at the Council on Foreign Relations, and I consider it a privilege.  Actually, I feel quite at home in this setting.  My life and career experiences have spanned four continents, so I am comfortable amid groups that are dedicated to promoting understanding of foreign relations and cross-cultural relations.  

We share a belief in the value of being engaged in global arenas and in the great potential for finding solutions when people work across national borders to address common challenges.  This has certainly been my experience in the Renault-Nissan Alliance.  Today I was asked to talk about creating international business alliances and to share some of the underlying principles and values of the Renault-Nissan Alliance model.  

The principles we hold sacred -- such as respect for identity, autonomy of management, the quest for synergies -- these form the foundation from which we have delivered consistent performance over the past eight years.  And I believe these principles can also be applied successfully to relations between nations in the context of today's globally interdependent society. 

If you are not familiar with the Renault-Nissan Alliance, I can capture the essence of this partnership with two simple words:  identity and synergies.  Let me explain. 

In 1999, Renault was a successful European automaker, but it had a limited global market presence.  Its growth potential was constrained.     Nissan had a significant global footprint, but was struggling after years of financial losses.  This proud Japanese company faced the need to seek support in order to survive.  So in March 1999, Renault bought a 36.8 percent stake in Nissan for $5 billion, and the Renault-Nissan Alliance was born.  That initial stake has since increased to 44 percent which is the maximum amount of shares that can be acquired following the principle of the Alliance, and Nissan, after the revival was complete, has acquired 15 percent of Renault shares. 

In the beginning, our talk of an alliance of equals was seen as a  polite way to describe a takeover, but we never tried to fuse the two together.  We did plan for cross-shareholding which is key to understanding the power of the Alliance strategy.  Both companies have an important vested interest in the other partner's success.   

So what is the Alliance exactly?  You can think of the Alliance as a fundamental document, like a constitution, that exists to formalize the management structure and governs the relationship between the two companies. The Alliance is not a holding company.  It's not a joint venture with limited scope.  It is a structured, disciplined partnership.  Each company has its own executive committee, has its own board, has its own set of shareholders, its own business plan.  Each is accountable for specific results to its board of directors and ultimately, of course, to its shareholders.  Brand identities are separate; no blurring between Nissan and Renault. 

And why is this distinction so important?  My experience with Nissan has reconfirmed my conviction that the most fundamental challenge of any  alliance or merger is cultural.  If one does not believe anything can be  learned from one's new partners, the venture is doomed to fail sooner or later.  People will not give their best efforts if they feel that their  identities are being consumed by a greater force.  If any partnership is to succeed, it must respect the identities and self-esteem of all the people involved.  Instead of melting everyone together, leadership must capitalize on the cultural differences between people and try to diminish the  psychological distances between them so that value can finally be created.  

Which brings me to the second descriptive Alliance word -- synergies. Between Nissan and Renault, the Alliance is a tool to develop synergies between the two companies but synergies only for the sake of enhancing the performance and total profitability of each partner.  For instance, we conduct sourcing together, through the Renault-Nissan Purchasing Organization, which now accounts for 80 percent of the total annual  procurement of $80 billion between the two companies.  We have joint manufacturing production in several locations such as Mexico, Brazil and now India.   

We cooperate in the common use and development of engines and  transmissions within the Alliance.  For example, Nissan takes the lead in the development of gasoline engines, and we have an edge over rivals in developing electronics technology such as batteries and electric motors.  We recently announced a new joint venture with NEC to develop and market lithium-ion battery with nearly double the power density of previous batteries.  This technology will allow us to almost double the driving distance of electric vehicles or significantly improve the performance and reduce the weight of batteries in hybrid electric vehicles.  

While Nissan is making R&D investments in these areas, Renault is taking the lead in developing clean diesel engine technologies.  Already, our clean diesel engines in Europe offer significant fuel efficiency and the ability to run on biodiesel fuel blends.  Together, this combination reduces CO2 emissions and our dependence upon pure petroleum-based fuels. 

Employees of Nissan and Renault are reaching across national borders to develop and share valuable new technologies, but no one is planting a flag in ideas that come from this country or another one.  The notion of national ownership is completely transcended by the quest for effective universal solutions, and the alliance model is perfectly suited for nurturing collaborations to produce results on a big scale such as those required to effectively combat global warming.   

Such synergy is behind the product announcement I am pleased to  make before this audience today.  Nissan will be the first Japanese  automaker to confirm a clean diesel application in a passenger car for all  50 states in the United States.  We will launch our first clean diesel  passenger car -- which is going to be a Nissan Maxima which is our flagship in the Nissan brand -- in 2010.  The car will be powered by an Alliance engine co-developed by Nissan and Renault.  

I recognize that previous generations of diesel engines in the  U.S. market may have created negative perceptions that still linger today.   But the new diesel technologies are far above the performance of those  older engines.  With clean diesel, customers will enjoy fuel economy that  is up to 30 percent greater than a gasoline engine with the same  displacement, lower CO2 emissions, higher levels of torque that make for  a satisfying driving experience. 

We are very confident about the potential benefits.  We are  putting our first application of clean diesel in one of our highest-performing vehicles, the Nissan brand's flagship sedan.  The launch of the  Maxima will mark the start of a broader diesel strategy in the United States,  and we are also studying the expansion of clean diesel to other markets. 

The global automotive industry has a responsibility to be a part of the solutions that increase fuel efficiency, reduce greenhouse gases and  develop new technologies and alternative fuels.  I say "part of the solution"  because we recognize that real progress will require an integrated approach, I would say from well to wheel, and from a wide range of industries, from consumers and from governments. 

Nissan's plan to reduce CO2 emissions is specified in the Nissan Green Program 2010 which we announced in December 2006. Earlier this year, we launched the 2007 Altima Hybrid, and we expanded the use of the Xtronic Continuously Variable Transmission in five 2007 Nissan models.  The CVT cut the fuel emission by more than 10 percent.   

We are also taking a leadership position in Flexible Fuel Vehicle  technology.  It's difficult to say which technologies will prove to be the  most popular among consumers, and preferences vary from one world market  to another.  I'm not sure Japan will adopt finally the same technology than Europe or than the United States or China or India.  Even so, Nissan is developing all the technologies now -- fuel cell cars, hybrid cars, biofuel-based cars, advanced batteries, clean diesel engines, gasoline engines, electric vehicles.  We have to develop everything.          When a clear market trend emerges, we will be ready to offer  customers what they want and, with our Alliance leverage, at a greater  scale.  We will serve our customers better, which is good for them and, obviously, for Nissan and for Renault.  But more importantly, we will put the advanced technology to service the markets. 

Amid the shifts and evolutions among consumer trends, government regulations and even the makeup of the global automakers themselves,  one message is becoming increasingly clear.  The old systems of doing business are being challenged by two particular trends.  The first is the push for globalization, which continues; and the second is the emergence of new economies -- new actors who want to play a role without having to be absorbed into a bigger identity.  That was a very clear message, you know, when you travel to China or a very clear message when you travel to India.            Companies are eager to enlarge their footprint in global markets.  At the same time, people, particularly in emerging countries, are trying to protect their identity.  The question of the 21st century is how to realize globalization while allowing people to preserve their own identity and culture.  The alliance model we embraced in 1999 is one -- maybe there are others, but this one is already there -- that we continue to engage in markets around the world.  When we went in China in 2003, we could not enter by acquiring an existing car manufacturer.  We entered with a 50-50 partner,  Dongfeng, who fully understood the dynamics, subtleties and constraints of its home country. 

We have had the same experience in India, where Nissan, Renault  and Mahindra are investing $900 million over the next seven years to  establish one of the largest automotive production sites in India. 

We're not acquiring or merging with anyone.  We are forming alliances with local partners.  We go in saying, you know, you still have your identity.  We have a lot of things to learn from you.  You remain who you are.  We will work together in a constructive way, in a way that is totally compatible with the diversity that exists in a global enterprise.  We will establish cross-shareholdings which means that we are going to have a long-term relationship.  We will develop strategies, establish priorities together.  And we will measure each other's success. 

The vision of the global economy of the 21st century could be aided by the values and strategies that have proven valuable in the Renault-Nissan Alliance concept.  Nations and their leading companies need not always compete in a way that leads to winners and losers.  Instead, by recognizing our increasing interdependence, by respecting each other's identities and each other's cultures, by enhancing each other's strengths and have a clear scorecard and, where possible, by finding synergies to improve each other's  weaknesses, then there can be meaningful and lasting results.  Results that  transcend boundaries and enrich people's lives. 

Thank you for your kind attention.  (Applause.)

RUBENSTEIN:  Carlos, thank you very much.  I'm going to ask a few questions, and then we'll have a chance for the audience to ask questions as well. 

But on the announcement that you just made, if you could tell us, would you expect that the new diesel car that you are going to be offering in the United States, how will its cost compare to a non-diesel car?  Will it be more expensive, less expensive?  And where will the car be produced?  Will it be produced in the United States or produced elsewhere? 

GHOSN:  Well, the diesel technology, like the hybrid technology, will obviously come with a cost that is higher than gasoline engines.  The big question is how much consumers will be ready to pay for this new technology.  And how much the consumer will be ready to pay for this new technology depends also on, at the moment of the introduction of this technology, what is the price of gasoline.  If you are at $3 a gallon or $2 a gallon or $4 a gallon, well the decision is not the same. 

But bottom line, these technologies are more expensive than gasoline engines.  At the same time, they fit better with the regulations, like the CAFE standards that we are envisioning in the mid term.  So, it's a kind of bet that you are making that emissions regulations are going to get tougher.  That energy price is going to continue to be high or is going to even grow at the higher level, which is going to justify it from the consumer point of view paying a little bit more money to get a diesel engine or a hybrid engine or something else which corresponds to the different technologies that are going to be available on the market.   

Now, diesel -- the car is going to be assembled in the United States.  The engine, at the beginning, will come from Europe, because that means that diesel is, to date, mainly a European technology.  But depending on the success of the diesel on the market, if it's very successful, and we think it will be, obviously, after this, the engine will be built in North America. 

RUBENSTEIN:  I see.  Now, you are running, as I mentioned earlier, companies based in Europe and based in Japan.  But suppose you were running a company based in the United States, a U.S. Big Three manufacturer.  What would you do to try to make our automobile industry in the United States more profitable, productive and more desirable to American consumers? 

GHOSN:  Well, you know, if you forget about, you know, what's the origin of this or that company, I think the U.S. has much more than three car manufacturers.  This has much more than that.  I think it would be fair to say that Nissan in North America is a big car manufacturer.  We have 16,000 employees.  Eighty percent of the cars we sell in the United States are made and assembled in the United States and sold in the United States.  We have a design center, a technical center, et cetera.  I'm talking about Nissan, I know very well, but I can tell you it is the same from Toyota and Honda.  I mean, ignoring the fact that the Japanese car manufacturers are becoming more and more an American car manufacturing is not a reflection of what's going on in the U.S. market.  And so, I think that it's totally possible to operate from the United States and have a successful business model.  It's totally possible.  And I think -- now, obviously, the observers of the industry are extremely pessimistic about what's going on with the big three.  I am not.  I think car manufacturers have the pattern of having ups and downs.  And we are an industry of turnarounds.  And we are an industry of we are used to hitting bumps and reflecting on them and drawing the lessons from them and reacting to them. 

So, I'm relatively cautious when one company is down, because you never know how they're going to perform after they drag all the lessons from the previous problem.  And Nissan is a company well positioned for this.  In 1999, we were written off.  Nobody believed that we would do anything.  We had a revival process that led us to be extremely profitable and to grow a lot.  Now in 2006, we hit a bump, because we missed our forecast.  So all of a sudden, everybody comes and says oh, now you're in trouble.  You're hitting a bump, there is no more, this strategy doesn't work, et cetera.  Yeah, but hitting bumps is normal in our industry.  In any industry, you know, from time to time, you have an alert.  And the biggest reaction -- the mistake is to try to hide it.  That's the mistake.  The mistake is to try to hide it and say no, don't worry.  There is no problem, you know.  Or this is due to the fact that the commodity price is going up and energy price is going up.  No, you should recognize the fact that you have a wakeup call.  You should recognize the fact that you have a performance crisis -- not a financial crisis but a performance crisis -- in order to put this attention inside the company and make people react and find the solutions to the problems that you're solving. 

If you are in a situation where every time you hit a bump you reject the responsibility of the bump outside, well, you put people inside the company in a situation where, at the end of the day, yeah, you know, you're right.  It's the exchange rate, it's the market, it's regulation, it's commodity prices, it's cars here and there.  But at the end of the day, you are not pushed to renovate your model.  You don't renovate your product.  You don't renovate your technology. 

What Nissan is doing now, which is something -- and there is a price to pay, because if you say I'm in trouble so everyone's going to write: oh yea, you are in trouble.  So all of a sudden, you have all these negative articles coming back saying oh, what's going on, what's going on?  But I think what's very important is that you talk to your own constituents, to your own stakeholders and tell them we're taking it as a wakeup call, and we're going to react to it. 

RUBENSTEIN:  You have, under your domain, approximately 360,000 employees which is a large number of employees, obviously.  How do you compare the workers and their work ethics and their capabilities in various parts of the world?  And specifically, do you think the American workers are able to produce cars as efficiently and as productively as workers in China or India, Japan or Europe? 

GHOSN:  Oh, yeah.  I mean, there is no -- when you take a look at -- we have a lot of indicators in -- (inaudible).  Particularly, we can take quality standards.  We can take productivity standards, et cetera.  The U.S. is still a very competitive country in terms of productivity and in terms of quality.  And you know, we continue to boost our capacities in the United States.  We're not trying to boost our capacity by bringing cars from other countries.  We still have about 20 percent of the cars that we are selling in the United States coming from Japan.  But this preceded, I would say, the installation of capacity in the United States. 

The U.S. is and can be very competitive.  You have to take into consideration the fact that you have the development of global suppliers now, which can be very competitive by shipping products from Mexico or from India or from China.  But it does not challenge the fact that cars will continue to be assembled in the U.S. if you want to compete in the United States. 

RUBENSTEIN:  Now, you have a lot of different cars that you could pick from to drive yourself.  What car do you actually drive?  (Laughter.) 

GHOSN:  Well, you know, I drive many cars.  I mean, as you know, I don't own any of them, but I drive.  (Laughter.)  I drive many cars.  I drive -- actually, I have four cars in Tokyo and four cars in France.  And on top of this, I drive competitive cars all the time, because I want to make sure that when you sit down with your engineers, they are really reflecting to you the reality of competition.  And the best way to check it is to drive the car yourself and try to see if it matches the description which is made.   

In fact, this habit that I have had since the beginning put me from time to time in trouble because, as you know, one day I was in Tokyo and I was driving a Porsche, and I was testing a Porsche.  And I'm telling the story the way it happened.  I think it was four years ago.  I went with my daughter.  She was eight-years-old at that moment.  And Sunday morning, I think it was, 9:30 in the morning, I took her to a bagel shop in Tokyo, because she said Daddy, I want a bagel.  Let's go drive and buy a bagel.  And so I put her in the Porsche.  It was a good opportunity for me to drive the car.  I put her in the Porsche.  We went to the bagel shop.  We went down, we bought the bagel, we went up in the car, and I was turning.  And all of a sudden, there is this motorcycle coming from I don't know where, and we hit the motorcycle.  We had an accident.  So, the news was Carlos has gone driving a Porsche on a Sunday morning with a beautiful young girl.  (Laughter.)  You can imagine the picture, you know.  You know, this CEO is fighting for Nissan and Renault.  In fact, he is driving a Porsche and, you know, Sunday morning, you know -- (inaudible) -- you know at 9 o'clock in the morning with a beautiful young girl.  You know, nobody could believe that I was buying bagels with my eight-year-old in a test car.  That's the kind of legend which obviously, you know, the version of the press was much more sexy than the one I was really doing.  Unfortunately, it was not the reality. 

RUBENSTEIN:  I think the story should have been that there are bagel shops in Japan.  I didn't know that.  (Laughter.)  But how do you actually do this?  Do you spend two weeks in Europe and then two weeks in Japan?  Is that how you do it?  And can you give us an idea of how you manage to pull this off? 

GHOSN:  Well, I am -- you know, David, I made a bet I travel less than you.  You know, you told me how many days you travel a year.  I travel less than you, because I'm trying to get organized and minimize the transportation.  I usually spend two weeks in Paris dealing with the Renault business.  And then an average 10 days in Tokyo to deal with the Nissan business, because in Nissan, after I took the job as CEO for Renault, we established a team of people, and we empowered them to run the business very closely.  So I have two weeks in Paris, 10 days in Japan and from every month, you know, I'm in the United States for one week, or I'm in China, or I'm in Brazil or India depending on what market needs my presence. 

RUBENSTEIN:  And what is the pleasure you get now?  In other words, is it building these global alliances?  Is it having, you know, a very healthy and good product for customers?  What is the pleasure you get out of what you're doing now? 

GHOSN:  Well, the biggest satisfaction that I get -- obviously, a CEO is always satisfied when he creates a lot value and he has a, you know, good bottom line, when he's beating expectations, et cetera.  I mean, this is a satisfaction I share with every CEO.  But we know that, you know, when you beat expectations, you have one day of glory for 364 days of trouble.  But at least you had this one day of glory.  You know, other people have 365 days of trouble and no days of glory.  So, you're always fighting for this day of glory, you know, once a year.  But on top of this, I have another satisfaction, particularly something which motivates me, is I really want to make the model definitely a successful one.  Having two companies, you know, no merger, no acquisition, working side by side, having French proud and working in Renault; Japanese proud and working in Nissan.  The two companies working together and spending more time collaborating than fighting each other.  And we've been doing this for eight years, you know, which is already a significant period of tie where you can say something is right about this alliance.  Because creating a lot of value and solving problems together and not spending time about how we're going to undo this or what's the next step of the alliance, how are we going to merge the two entities, that's something which motivates me.  Because I really want to make this alliance model something that people can eventually copy or use it as a solid and serious reference. 

RUBENSTEIN:  Now, you speak, as I understand it, four languages -- French, English, Arabic and Portuguese.  But you don't speak Japanese, so when you went to take over Nissan, how was it to run a Japanese company without speaking Japanese?  How did you find it possible to do that? 

GHOSN:  Well, you know, I always said it would have been easier for a Japanese to do the job than for a foreigner.  I think an outsider -- it's easier.  If you are an outsider, it's much easier to do the job, because you're not linked to any previous decision or any previous leak inside the company.  But speaking the language is very important because, in a certain way, communication is at the heart of management, and if you cannot communicate with people, you have to work through somebody to communicate.  And understanding what people are saying is very tough.  So for me, I consider it as a constraint.  But you know, we have to do the job anyway. 

RUBENSTEIN:  Now, when you are, if you do, relax, what do you find relaxing?  On weekends, do you ski?  Do you play tennis?  Do you play golf?  What do you do for relaxation? 

GHOSN:  Well, what I do for relaxation usually is I spend some time with my children, you know, because you get to know what is the latest music and what are the latest movies and what are the latest trends.  And that is the funniest part.  Unfortunately, it's temporary because, as you know, when they grow up, they have other activities.  But I'm blessed enough to have kids who still have 12, 14 and 17-years-old.  So the weekend, for me, the biggest joy is to enjoy some activities with them through many things.  You know, doing sports, skiing, swimming, reading, talking about their latest school report.  That's one of the most rewarding moments.  That's when I relax completely. 

RUBENSTEIN:  And what kind of cars do they drive?  (Laughter.) 

GHOSN:  I have two drivers.  The older daughter drives an Xterra in the United States, and the second one is asking for a Z, but I did not accept it.  (Laughter.)  So she's going to have to settle for a Sentra or an Altima which is different.  

RUBENSTEIN:  I think I'd like to now invite council members to join the discussion.  Please wait for the microphone and speak directly into it.  And please state your name and affiliation.   

So, Arnaud, will you want to start first?  There's a microphone and just -- everybody knows who you are, but for the record, you might state it and your affiliation.  

QUESTIONER:  Arnaud de Borchgrave, CSIS.   Could you tell us in the context of emerging disruptive technologies how nanotechnology will impact your business 10 to 20 years out? 

GHOSN:  Well, you know, there are a lot of things that are going to happen in our industry in terms of technology.  Not only in terms of engine combustion -- that's the most popular one -- but even in terms of material, in terms even of control of the car, in terms of safety.  We're talking about what we call the safety bumper where you're going to be covered against any kind of risks.  So nanotechnology is one of the technologies we are counting on to develop many devices which are part of the future.   

We think there are three or four fundamental trends that are going to determine the car of tomorrow.  One of them is the environment, no doubt about it.  Consumers want environmentally friendly cars.  They want to have the pleasure of driving without the guilt of driving, and it's clear.  And they want it at a very reasonable cost.  They don't want to pay a bunch of money for this technology.  And that's a message for us, and we are working on all the technologies that allow us to do that.  That's number one.   

Second, they want very safe cars.  They want not passive safety, they want active safety.  They want to make sure if you have a moment of inattention, it's forgiving.  So, we are developing a lot of technologies, and you're going to see a lot of devices.  You know, one of the devices that I found amazing which you're going to see on Nissan cars next year is what we call the round monitor.  That means you're going to be sitting in the car.  Now today, you can sit down in a Nissan car or in other cars and see what's in the rear, okay, because you have a camera in the rear reflecting.  Of course, you don't have any more to turn and have blind angles.  The new technology -- you're going to see the car from the sky, okay.  You're going to be sitting and you see yourself and your car from the sky.  So, you don't even have to turn right or left if you want to drive your car.  You see exactly what's going on around you.  You can park the car without even moving your head.  These kind of technologies, very simple technologies, are going to make driving something which is much easier and much safer.  

Plus, the communication today, how you communicate from the car, is something which is, from time to time, a constraint.  We are eliminating all the constraints about them and the driving pleasure.  Still, we're trying to fight against the boring car.  We want the car that you feel good about driving, it gives you some sensation -- the emotional part of it.  And for this, a lot of technologies are being tested, a lot of things are being tested. 

RUBENSTEIN:  I'd like to get that thing from the sky, because I know when I'm driving, people are always honking at me.  (Laughter.)  I can conclude I'm not that good a driver. 

Yes, sir. 

QUESTIONER:  Thank you for being here.  I'm Dave McCurdy.  I'm the new president of the Alliance of Automobile Manufacturers. 

Recently, there was a watershed event before the U.S. Congress where four of your colleagues testified on climate change.  And at that testimony, they indicated a willingness to work with government to develop an integrated, economywide -- which you mentioned -- cap and trade system or system to address greenhouse gas emissions.  With your vast experience in both Europe and Asia, would you like to comment on how you see such a system evolving and the role that automobiles can play? 

GHOSN:  Well, you know, an integrated approach is, for me, fundamental.  But integrated approach is always a little bit suspicious.  Why suspicious?  Integrated approach means, you know, you have to solve the problem from well to wheel.  But now, automatically, say wait a minute, that means nobody moves, you know.  If everybody doesn't move, nobody moves.  That's what it means.  You say no.  The car industry will bring its contribution anyway, okay.  And I think in practically all the market in Japan, in Europe and the United States, car industry, obviously, pinpointing the cost and the technology and the effort, which is fair.  But at the same, time we'll do the job into making this industry much more fuel efficient with an emission of CO2 much more efficient than we have ever, ever seen.   

But the question is that if you do it only in the car industry, you don't solve any problem.  Because the car industry generates, at maximum, 20 percent of the CO2 generated.  So, what's happening with the 80 other percent, okay?  So, if you spend your time concentrating on the other 80 percent, you are suspicious that you don't want to do your part of it.  We say, okay, and we're going to do our part.  We're going to do it anyway.  So it's in the bank.  We're going to do it.  It's competitive.  It's regulatory.  We're going to do it. 

But now, this being in the bank, let's talk about the other 80 percent.  Because if you keep it open on the 80 percent, at the end of the day, you're going to have the same, if not more, CO2.  And frankly, there is no difference between the CO2 emitted by a car or CO2 emitted by somebody else.  It is the same problem leading to the same result.  So we're pushing to some kind of integrated approach so at least all the efforts made by all the industry can have a meaning, that you're ending up having cleaner air, because everybody's bringing its contribution to it.  

And you have a very good example, a very simple example -- fuel cells -- a fuel cell car.  A fuel cell car, you take hydrogen, put it in the car.  And you drive, and you transform it in water.  Zero -- nothing -- you have no CO2, you have no emission, nothing at all -- zero.  The question is, how do you make the hydrogen, okay?  So, if making the hydrogen is going to be done in a process which is going to emit a lot of CO2, then you have displaced the problem from the car industry to somebody else, okay.  So, the car industry has no more problem, but you didn't solve the CO2 issue.  That's why integrated approach, making sure that the technologies are seen from well to wheel.  Very important to avoid sub-optimization for a problem which is mainly a global problem. 

RUBENSTEIN:  Okay, Bill. 

QUESTIONER:  You indicate that the two companies are separate companies.  And if you were brothers rather than one and the two of you sat down and did all this planning, sooner or later somebody's going to say you're violating the antitrust law.  So, how do you skid in that problem? 

GHOSN:  Yeah, well, you know, what's -- we don't have this problem because very simple because Renault is not present in the United States. 

QUESTIONER:  (Off mike.) 

GHOSN:  Yeah, exactly.  But in every market -- for example, in Europe, Renault represents 10, 11 percent market share.  Nissan represents 2 percent market share.  So, 10 plus 2 is still not something that can be considered as a dominant position.  In Japan, Nissan represents 15 percent market share.  Renault has less than 1 percent market share.  So, in China, Nissan is very big, Renault is not present.  In India, Renault is going to be very big, Nissan is less present.  So, we are in a situation where in no market we represent a dominant force together.   

But I agree with you that if you had two big presence from the two car manufacturer in one market, it may raise some questions.  But we don't face that case today. 

RUBENSTEIN:  But there was a discussion that you had for a while with General Motors.  Had that gone forward, would that have produced any antitrust problems?  Or do you think that ever had a chance of going forward? 

GHOSN:  Well, you know, I -- I mean, it's a question you should ask to people who are imagining a GM-Chrysler alliance today.  I mean, how this would fly, you know.  But it's still imagined, and it's still being worked on.  You know, it depends on what kind of collaboration you're establishing with the two car manufacturers and on what basis.  If you're sharing purchasing, if you're buying together and sharing platforms and sharing technology, this is something.  Now, if you start to exchange information about pricing and other elements, it may cause a problem.  But you know, we don't have to worry too much about this because, as you know, the approach with General Motors did not end up with any results. 

RUBENSTEIN:  Yes, in the back -- yes, ma'am. 

QUESTIONER:  Hi.  My name is Janet Grissom, formerly of Ford Motor Company.   

You are a legend in the auto industry, and you know something about alliances.  So my question is, what could Daimler and Chrysler have done to make their alliance a successful one instead of what we see today? 

GHOSN:  Very hard to answer your question from outside, frankly.  I mean, I can speculate on it.  There is something real about the car manufacturers that if you want to know the reality you have to be inside -- you have to be inside.  Even from time to time you are inside, you don't know exactly what's going on.  So when you are outside, it's very difficult to understand what is going on.  One thing which is real is alliances work, but they are very difficult to manage.  Potentially, they can unlock a lot of value, but there are so many traps in terms of management that it's very difficult to make one.  I don't think it's the principle today, which is something that is not reliable.  I think the execution of alliances is something which is extremely delicate.  And this is something which can drive, you know, destructive results. 

But to answer your question, I think it would be better to ask the people inside Daimler Chrysler.  They can give you a much better and substantiated argument than people from (outside ?).  I can tell you why Renault-Nissan is working because, you know, on the surface everything is fine.  But there were a lot of conflicts, and there were a lot of tensions.  And from time to time, decisions were not always easy to be done.  And we had to clearly always stick to our principle to avoid distorting the alliance.  It was not always easy but -- yeah. 

RUBENSTEIN:  Well, they should have hired Carlos Ghosn I guess is the real answer.  (Laughter.)  But if you today were in the private equity business and -- (laughter) -- you had a chance to buy Chrysler for 4 (billion dollars) to $5 billion, would you do that?   

GHOSN:  I should ask you the question.  (Laughter.) 

RUBENSTEIN:  I'm asking you.  

No answer -- (laughter) -- okay. 

Yes, sir -- John. 

QUESTIONER:  Good morning, and thank you very much for being here.  I'm John O'Connor with J.H. Whitney & Company. 

Could you talk a little bit about what is the most exciting synergy you see as between the two alliance members, Nissan and Renault?  And what are you doing to motivate and incent your people to realizing it?  And what do you think the biggest challenge is? 

GHOSN:  Well, the most exciting synergies always come from technology.  It's always exciting to see, for example, how some devices developed by Nissan have been used by Renault, even in the Formula One racing.  It was interesting also to see how much processes and technology devices developed by Renault have been used by Nissan.  And every time -- I do know it's always very rewarding to see this, because engineering is a (inaudible) of every car manufacturer.  That's where the DNA of every car manufacturer is.  And for engineers to work together is not easy.  But every time engineers work together across cultural boundaries, it's very refreshing and delivers a lot of results.  So, that's for my point. 

Now, what is the biggest threat I would say for the alliance?  The biggest threat of the alliance is that problems appearing in one car manufacturer or the others appear or are being blamed on the alliance.  And we know every time a car manufacturer had a weakness, it's always generated by its own business and its own decision.  But the temptation to blame it on the alliance, to say well, you know what, yeah, we're not advancing so fast because of the alliance, or we're not getting this result because you are dedicating too much resources for the alliance, that's the biggest trap.   

Today, it's not happening because overall the results of Renault and Nissan are good results.  They are not superb, but they are good in an industry which overall is not getting a lot of good results.  But we have to maintain a high level of performance in order to protect -- protect -- each partner to fall into this trap. 

RUBENSTEIN:  Right here. 

QUESTIONER:  I'm Branco Terzic with Deloitte. 

And I want to follow up on your comment on engineering.  You're an engineer. 

GHOSN:  Yeah. 

QUESTIONER:  I happen to be one, too.  About one-third of the engineers in the United States are going to be retiring in the next five years -- clearly, a shortage.  You've got 350,000 employees.  You just said engineering is the heart.  Are you going to have enough technologists, engineers coming through the pipeline? 

GHOSN:  Well, you know, the big revolution that took place for the last five years -- and obviously, everybody's saying yeah, the Internet, which is true -- is the fact that now work -- not only physical work but intellectual work -- you don't have to do it in your neighborhood.  You know, if you're lacking engineers today, what's going to happen is you're going to establish a technical center in Mumbai, or you're going to establish a technical center in Hanoi, or you're going to establish a technical center in Beijing, and you're going to continue to do the work.  That's what's going to happen.   

So, when you see, for example, I was in India last week.  And the head of the Indian Institute of Technology was telling me that every year they have 250,000 candidates for 4,000 spots in Indian Institute of Technology which is the best technology institute of India.  So, the number of engineers worldwide is not the problem.  The problem is that if you need them in the United States and they are being trained in India or in Russia or in China, well, it's a lost opportunity, I would say, for employment and development in the United States.  But it's not lost opportunity for you, because you're going to go and organize, and you have many companies who would be happy to do it for you.  You know, building a center for you, hiring people, having the facility, and you just have to log your computer on and do some training and send a couple of expatriates, and you can have a big power of the allotment of engineering assured. 

RUBENSTEIN:  When you're hiring executives in your companies, do you prefer people that have engineering backgrounds, or would you prefer people that have MBA backgrounds or some other different type of backgrounds?  What's your experience about who are the best executives? 

GHOSN:  Well, usually the best executives are -- I mean, it's more a character than a training.  I mean, it's more people that we are looking for than what they have been trained on.  That's number one.  We always look at, you know, what the person get, what kind of motivation.  You know, what kind of can-do attitude they have.  That's very important.  But we like MBAs.  We obviously love engineers.  We are mainly a population of engineers.  And these days, you have a lot of people who are trained as engineers and then move to make an MBA.  So, we're having people with the technical background and a business graduation.  These are very good profiles for a car manufacturer.   

RUBENSTEIN:  Okay -- a question here -- yes. 

QUESTIONER:  My name is David Good.  I represent the Tata Group here in the United States. 

You referred to your alliance with Mahindra.  I've also heard that Mahindra's planning on bringing a car to the United States into the U.S. market.  Are you going to be involved in that effort?

GHOSN:  No.  It is their decision and their initiative.  But I think in the U.S. market, when you take a look to the segmentation of the U.S. market where most of the cars sold in the United States the price is above $10,000, okay?  And you take a look about what kind of product consumers can buy below $10,000, still having a decent car -- not so much offers.

Well, if we keep it this way, this is going to be a huge opportunity for Indian car manufacturers to come and say, Okay, we're going to take this segment of the market and we'll come with our own offer.  Because as you know, Tata, Mahindra, Maruti and others are capable to build cars at much cheaper cost and obviously bring it at the lower price.

So you know, we are looking at it very seriously, because in a certain way this industry belongs to anybody.  The market belongs to nobody so everybody can come and compete and bring the car and let the best product prevail.  But we think if we do not want to miss this opportunity, we have also to come with some kind of offer below $10,000.  I'm talking about the global car manufacturer.  And you know that everybody's working on it today.

So I would not be surprised that Chinese or Indian car manufacturers come to the United States.  And I think the opportunity for them is going to be this range of price, which is below $10,000.  But I'll bet many other car manufacturers will come also in this range.

RUBENSTEIN:  Yes, sir, right here.  There's a mike right behind you.

QUESTIONER:  Joe Grimes.

Japanese have a tendency to think that they are unique -- not unusual for other countries -- but I've worked in Japan and it is different from working Europe and the United States.  Could you say something about the different kinds of problems you countered when you went to Japan and what you're dealing with in France and the U.S. and what you've learned from that?

GHOSN:  Well, yeah.  Japan is very different from Europe or very different from the United States.  And all those of you who have businesses there or have lived there know the particularities of Japan.

I didn't know anything about Japan before arriving in 1999 -- nothing.  As you know, when you are in school in France and you're a French student, your world is mainly made by Europe, the Middle East and the West.  What you learn about Asia is very little and maybe a little bit about China, but for you Japan is unknown, India is unknown, Southeast of Asia is unknown.  And when we -- when I arrived in 1999 I knew nothing about Japan.  I knew the legend of Japan, but nothing about it.

I appreciated the -- I learned a lot in Japan.  I learned a lot because Japan was so different.  I mean, as you know, you never learn from an environment you're familiar with.  You always learn from an environment which is very different to you when you have to learn the language and understand the habits and try to understand the culture.

And what's very different for me compared to Europe or the West -- what's specific about the Japanese culture?  As you know, the Japanese culture is a very disciplined culture.  And for the car industry that's very important, because we are a very complex industry so if you don't have discipline in the car industry, there are a lot of opportunity you're going to miss. 

Second one:  There is a kind of attention given to processes in Japan.  It was interesting at the beginning when we had French people working with Japanese people and discussing together, it was very difficult.  French people thought that Japanese people were very slow in terms of concepts and strategy and learned to understand that it's not a question that they did not get the concept, but Japanese people will never accept the concept unless they know how they're going to implement them -- what's going to happen after this.  So understanding the concept for them is also understanding how they're going to implement the concept.  They cannot understand the concept as a theoretical exercise.  They need to understand as:  What are we going to with it; how are we going to implement it?

So at the beginning you think it's slow or they don't understand.  In fact, it's completely different.  It's like saying, okay, how am I going to use this?  And if I don't know how I'm going to use it, I don't understand it.  Well, the French is completely different, as you know.  The French can get the concept independently of execution.  (Laughter.)  Yeah!  Well, it's part of the culture.  It's a reality.  It's not good or bad.  It's the way it is.  So then the Japanese looking at the French they say, yeah, he's very quick, but what is he doing with it, you know?  He gets it, but how is he going to execute?

So the most important element is how do you turn this difference existing between two different culture into, what can I learn from him?  What is he doing better than me?  How can I learn from it?  And my Japanese -- my experience was, you know, attention to processes, attention to detail, importance of the customer.  When you see the -- you know, why a lot of products coming from Japan are very high quality -- because it's combined attention of processes, attention to details, supremacy of the customer.  The dedication that the Japanese can show to the customer is amazing.  It's amazing!  And this is something that, you know, when you have seen it you can try to implement it in Europe or in other places, it's very enriching. 

But it has been a wonderful experience.  I mean, I was not always -- I didn't agree on everything, because you know, I'd been fighting the seniority rules and I'd been fighting what I consider the segregation against young people in Japan.  I was fighting against -- at least to promote diversity.  We didn't have enough woman executives.  No decision made while 50 percent of our cars are sold to women.  So there were a lot of rules which were completely ineffective in a corporate world that we tried to change.  But at the end of the day it has been a fascinating experience and I learned a lot.

QUESTIONER:  Is your experience with labor unions in different parts of the world -- can you comment on how they contrast or how they're similar?

GHOSN:  Oh, yeah.  I mean, I can comment.  (Laughter.)  I'm going to tell you -- I'm going to tell you one story and you're going to understand the difference.  One event:  I arrived in Japan in April 1999.  The alliance was signed in March 1999.  When I arrived in Japan, obviously the media started saying, "The cost killer is arriving in Tokyo."  So you can imagine the reaction of the unions in Japan by saying, you know, here is a guy, we never heard about it.  We don't even know what is Renault.  We cannot locate France and are saying the cost killer is coming and now they're structuring and heavy, et cetera.  They were very skeptical and they were even a little bit, you know, wondering what was going to happen to Nissan.  In a certain way they were really not very proud of the kind of alliance that Nissan has established with Renault, because they didn't even know what Renault was.

So I started to work, you know.  And two months after I started in Japan, the union of Nissan that was described as one of the fiercest unions in Japan, et cetera, they came to see me.  And they say, okay, we're going to have a meeting.  And you know, they obviously started to talk about the fact that the plants are -- we didn't invest in the plants and headcounts are down and morale is down, et cetera.  I said, oh, it's fine.  At the end of the day I told them, look, I have one more month before I come with my plan.  Is there any particular thing -- one particular thing you want me to keep in mind before, you know, we go ahead with the revival plan?

And that's what the most -- one of the most defining moment.  One of the most amazing moment in my career that the representative of the union stand up and say, you know, what we want from you are results.  We've been through so many plans and they all fade.  We have been through so many promises and they all fade.  If you bring results, we'll support you. 

Well, there's not a lot of countries in the world where the representative of the union will stand up and give you one single message:  Deliver -- that's all we want.  And if you deliver, we'll support you and that's exactly what happened.  And I delivered because they supported me.

RUBENSTEIN:  Now, a question here.

QUESTIONER:  Ted Kassinger with O'Melveny & Myers.

David asked me to ask you if you were in the private equity business -- (laughter) -- would you invest in the auto parts supply industry?  Could you give us your assessment of that industry?

RUBENSTEIN:  I hope the answer's yes, because I've -- (laughter).

GHOSN:  No, no.  If I was in the private equity business yes, I would invest in the industry.  I would invest in the industry and I would probably make a lot of money for the simple reason is that I think this industry destroyed more value and there -- (audio break) -- to destroy value.  And you can see that in many -- not all the operation are doing like this.  That many acquisitions that took place in many sectors in the industry are doing very well.  They are doing very well.  In fact, they may end up creating more value than the car manufacturers themselves.  So yes, if it's appropriately managed, you can create a lot of value as a supplier or even as a car manufacturer.

RUBENSTEIN:  Let me ask you this:  If I wanted to go buy a car today in the United States -- we have a habit here of negotiating prices and so forth -- does that happen around the rest of the world?  When people in Japan buy cars, people in Europe, do you negotiate with the salesman?  And in the United States, how much flexibility does the salesman really have?  (Laughter.)  They usually go back to the manager to get the authority to give you a little bit of a discount.  Is that a bit of a show, or what's really going on?

GHOSN:  Everybody negotiates everywhere in the world -- everybody.  That's not something -- now, what you expect depends on the brand.  So some brands offer you deeper discounts than others.  In fact, you cannot go only with one number by saying, okay, I'm going to go there and I think it's a good deal if I get 10 percent off.  You have to establish a metrics where you put all the brands here and have the percentage of discount, which is a benchmark for each one of them and it's very different.  It's very different.

The point that you have to consider when you buy a car is not only what is the price that you pay when you buy the car, but also what is the resale of value of the car the day you sell it?  That's extremely important.  And there is a relationship between the amount of discount you get and the price of your car when you sell it.  And you have to be very careful about what kind of brand you're buying.

Now, if you have a specific brand in mind we can have a private discussion.

RUBENSTEIN:  Well, let me ask you:  When I buy cars they always say, "Would you like the rustproofing?"  And I never knew what that was, but have you ever heard of that?  Does that -- I don't really need to buy rustproofing, I guess.

Yes, sir?

QUESTIONER:  Bill Lennox, Goodrich.

I'm interested in two things:  R&D and process.  As you're approaching a rather ambiguous future, you talked about a number of the ways ahead.  How do you do that with the two companies?  Is it collaborative, complementary, haphazard?  How does that work?

GHOSN:  Yeah, well, on the research is complementary.  It's complementary and we don't try to do the same technology from both sides, because you know very well that if you want to develop one thing from both sides it's going to cost you much more energy and resources for maybe a better result, but it's not obvious.

What we are trying to do is to say, okay, this particular technology is going to be the block by Renault, but then the results are available for Nissan and the other way around, which allows you, for example, in our case if you -- (audio break) -- the technology we're working on, gasoline engines are mainly Nissan; diesel engines are mainly Renault; flex-fuel engines are mainly Renault; hybrid engines are mainly Nissan; electrical cars are mainly Renault.

So what we're trying to do is we divide the different technologies, which would allow a company to invest only in part of this technology, but get the results for all the technologies.  That's what we're trying to do.  Complementary is the real way to go. 

Processes -- it's collaborative is benchmarking.  I mean, I have a process, you have a process in the same area.  Let's take manufacturing process.  I'm going to go and benchmark you.  We're going to see what is the best process and then we're going to agree what is the best process and I want to copy it, okay?  The system "de production Renault" is a copy of the Nissan production way.  We didn't reinvent the wheel.  We said, Okay, Nissan production way is working very well.  You know, Renault people came, benchmarked it and said, Okay, we're not going to reinvent the wheel.  We're going to adapt it to Renault.

The process of purchasing -- Nissan people, when they discovered at the beginning of 1999 the process of purchasing was not working, went to Renault, looked at it.  They see it's much better -- copied it, okay?  No tried to do a little bit better or we make a hybrid.  We just copy it.  And it is more -- it's crystal clear.  It's complementary and it's what is best is reproduced at the other company.

RUBENSTEIN:  I think we're going to end it there because we're at our allotted time.

I want to thank Carlos Ghosn for his insights and his time he has given to us.  And I assume everybody here will now rush out and buy a Nissan or a Renault car.  Thank you very much.  (Applause.)

(C) COPYRIGHT 2007, FEDERAL NEWS SERVICE, INC., 1000 VERMONT AVE.

NW; 5TH FLOOR; WASHINGTON, DC - 20005, USA.  ALL RIGHTS RESERVED.  ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED.

UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND FEDERAL NEWS SERVICE, INC. RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION.

FEDERAL NEWS SERVICE, INC. IS A PRIVATE FIRM AND IS NOT AFFILIATED WITH THE FEDERAL GOVERNMENT.  NO COPYRIGHT IS CLAIMED AS TO ANY PART OF THE ORIGINAL WORK PREPARED BY A UNITED STATES GOVERNMENT OFFICER OR EMPLOYEE AS PART OF THAT PERSON'S OFFICIAL DUTIES.

FOR INFORMATION ON SUBSCRIBING TO FNS, PLEASE CALL JACK GRAEME AT 202-347-1400.

THIS IS A RUSH TRANSCRIPT.

-------------------------