On Skeptics, Dealers, C.S. Lewis, Freud and God

Ward's interviewed Carlos Ghosn just before he delivered his keynote speech to the 2005 National Automobile Dealers Assn. convention in New Orleans.

Here's an edited version of the interview:

Ward's: When Renault acquired control of Nissan, a lot of Detroit folks, remembering the failed Renault-American Motors Co. merger, said it wouldn't work. Why were they wrong?

Ghosn: People are usually pessimistic when some kind of alliance or acquisition takes place. It's reasonable that they are skeptical because the likelihood of success can be low. But the Renault-Nissan partnership was successful due to two facts.

The first is a clear understanding from the beginning that this would be a partnership and not an acquisition, and that this partnership would be based on respect for different corporate, brand and operational identities.

The second is that this partnership was created to make synergies work. Not synergies for the sake of synergies, but for lower costs, higher quality, better sales.

Plus, we just did it. We went by the rules for every decision and in front of every obstacle. We were consistent. If we did better than anyone thought we would, it is because we had a clear strategy with a clear principal, and executed it.

Ward's: Were you surprised as well?

Ghosn: I was not surprised by the skepticism. I knew this would be difficult because the threats are predictable and most of the threats are always internal; people inside the companies, in very good faith, can present a threat to your alliance. You need to handle them in a constructive way. I was not surprised at the success because I saw a determination from both sides. But I don't want to give the impression it was easy. It wasn't. Threats were coming from everywhere. There were difficult moments. There were fictions. But you always return to the right solution and stick by the original commitment.

Ward's: Currently, what is Nissan's biggest strength and its biggest weakness?

Ghosn: Nissan's biggest strength is that it made a big change in a relatively short time without disrupting the house. It was a big reform and re-foundation without disruptions.

Most of the change that took place is beneficial for the future. And it happened without the kind of messiness that usually goes with big changes. So, when the company faces a difficult situation again, it can do so with confidence and without breaking down.

The biggest weakness we're facing today is becoming complacent, people inside the company saying, ‘Let's enjoy it’ or ‘Let's calm down a bit.’ This would be a big mistake.

Ward's: How much of Nissan's comeback involved dealers?

Ghosn: The dealers have contributed to the turnaround through their suggestions, ideas, hard work, enhancement of the brand, the shopping experience, the service experience.

Ward's: Did you have to quell a lot of dealers' fears?

Ghosn: When an auto company is in a bad situation, dealers are supportive because they want the company to succeed. They've invested large amounts of money in their dealerships. Many times these are family businesses. They don't want the investment to be lost. So when there is a change in management at a troubled company, dealers are the ones who support you because they have so much at stake.

Dealers, particularly in the U.S., have given many suggestions. Nissan's development of the Titan was born from my first meeting with U.S. dealers who said Nissan needed a large pickup truck. They said there was a big opportunity there. We did a study and discovered they were right.

Ward's: What do you tell dealers now?

Ghosn: That you are the face of our brand and that doing great products alone is not sufficient. We want to make sure we also have great service and great customer satisfaction. This is partly the duty of Nissan, partly of dealers. We work together on it.

Ward's: Nissan has about 1,200 dealers in the U.S. Is that enough?

Ghosn: There may always be new points, but we have a reasonable amount. Not all our dealers are at the same level of efficiency. Our biggest area of improvement is to bring the lowest-performing dealer to the level of the highest-performing dealer. If we do that, it will be a tremendous boost to the Nissan brand.

Ward's: How do you do that?

Ghosn: By showing results, offering training and coaching. It's convincing when you show a partner that someone else is doing twice as much for twice as less. This is a question of a dealer working to improve, not just on his own, but with the support of the company.

Ward's: What's the best and worst thing dealers can do for and to a franchise?

Ghosn: The best is getting the best people and, second, giving the most honest and thoughtful feedback to the car manufacturer about what's going on. The worst is indifference, just not caring. It can happen.

Ward's: What in 10 years will be the biggest change for dealers?

Ghosn: The consumer is going to be much more demanding. The most successful dealers will rethink their operations to offer more value and emotional reward to customers. You'll see a big difference between the performing dealer that everyone wants and the average or below-average dealer that no one wants.

Ward's: Why are customers becoming more demanding?

Ghosn: They are much more informed. That's all. He's more demanding because he's more informed about the price, the technology, quality and expectations. He's going to get more informed, and, because of that, more demanding.

Ward's: Where will Nissan North America be in the next 10 years?

Ghosn: Nissan is driven by profit, and one of the most profitable operations we have is in the U.S. So expect that to continue because there is a culture today of being rewarded for a high level of profit. That's not going to change. We don't put cars on the market that are not profitable. We are not preoccupied by volume or bringing cars to market just to run our plants. We think there's more potential for Nissan in the North American market. Consequently, we intend to transform that potential into reality. So you'll likely see a much bigger North American operation.

Ward's: AutoNation CEO Michael Jackson says interest rates and such preclude dealers from carrying the high inventories of the past. Is he right and will smaller inventories affect shoppers' buying habits if there are less cars to choose from on dealers' lots?

Ghosn: It's always much better to see the car before the sale. At the same time, there's a cost for this. The question is how much are you willing to pay to offer this to customers. It's more a question of common sense and a good balance. The important thing is for customers to get the vehicles they want.

Ward's: What was your first car?

Ghosn: A Fiat 127 bought in Paris because the price was right.

Ward's: What's your all-time favorite car?

Ghosn: A Nissan 350Z convertible.

Ward's: What book are you currently reading?

Ghosn: The Question of God by Armand M. Nicohi, a Harvard professor who sent it to me. It's a virtual meeting between Sigmund Freud and C.S. Lewis who discuss the existence of God. It's very well done.

Ward's: USA Today recently asked you and five other top auto executives what keeps you up at night worrying. All of you said you slept well. Is that a shared survival skill of automotive CEOs? If so, what's your secret?

Ghosn: I think we sleep so well at night because we work so hard throughout the day.

A Man of the World

Nissan Motor Co. Ltd. CEO Carlos Ghosn worked 18 years for France's Michelin tire company before joining the upper ranks of Paris-based Renault in 1996.

Now headquartered in Tokyo, Ghosn became the first Western auto executive to become CEO of a Japanese auto company. His strategy for restoring Nissan to profitability and turning around its lagging sales in North America won him dealer accolades as a “hands-on” executive who brought Nissan unique styling and saved Infiniti from extinction in the hotly competitive luxury market.

Of Lebanese heritage, Ghoson, 50, was born in Brazil and educated in France.