Carlos Ghosn - CEO, Renault-Nissan HARDtalk

cross Antarctica on foot in temperatures of minus 90 degrees

Celsius. Now it's time for HARDtalk.

HARDtalk is in Paris, headquarters of one of the world's biggest

carmakers, Renault, long regarded as a jewel in the crown of French

industry. But a jewell that has lost much of its lustre. Despite

joining forces with the Japanese giant Nissan, Renault has seen

sales and profits slump which is making the French government

nervous. Carlos Ghosn is the CEO of Renault and Nissan. He turned

Nissan's fortunes around but can he do the same for Renault?

Carlos Ghosn, welcome to HARDtalk. Thank you. Right now, Renault

appears to be running on empty, the business is not performing well,

why? Any business in Europe is not having the business go well. I

think Renault, if you take market share, if you take volume of sales,

yes, the performance is not good, it should be much better next year.

We will have new products that will help us regain market share. In

financial terms, I think we are not doing much better than the

competitors. I would say it is a mixed picture of resistance on

sales because of an older line-up which were changed in 2013. Reggae

in the balance sheet and in the profit results. When Europe is in

trouble, Renault, of necessity, is also in trouble. You are so tied to

the European economy. To see the impact of Europe on car

manufacturing, you should see the footprint of car manufacturing in

Europe. In the case of Renault, this percentage is 50%. 25% in

France. This is a footprint that is not to your advantage. The European

market is sinking, minus eight -- 8%. You need to be sure that you

are going to be crossing this period with a good balance sheet,

with a positive cash flow and positive results. Don't you need to

be sure, in a strategic sense, you are shifting away from this

alliance upon European markets? The message is that Renault has been

too reliant on its core, traditional European market. When

we launched the winter plan two years ago, we said we were shifting

away from Europe. It does not mean we are abandoning Europe, we have

the ambition to stay the second largest brand in Europe. We are

going to be acting in a very effective way with a lot of

products coming. At the same time, we recognise the weakness on

depending 50% on any market. Not only Europe. The same with Nissan

depending too much and Japan. Much of your investments and strategy is

about developing in other markets. Just to stick with Europe. What is

striking, at Renault you are performing so much worse than your

competitors in Germany. Sales across the French and European

markets are down quite significantly, you look at BMW,

Mercedes, they are looking at increases. They are doing well. Is

this really a story about a leading business exhibiting all the

problems that France generally has, becoming increasingly uncompetitive

with Germany. I do not think you can extrapolate to this level. I

cannot talk about my competitors. We are looking only at sales. Here

are just summarising... I am looking at productivity and

economic efficiency. You should take a look at the economic profit,

the cash flow, these are the most significant indicators for us. At

the end of the year everyone will publish their results, then you'll

have a good opinion. We have a specific, difficult point, the

renewal of our product line. When you find yourself in this

particular week point, about to renew some major cars inAt, you

have a seasonal decrees of their market share, it does not mean that

will be much more competitive, but there is an automatic translation.

This is not to say there is no problem, we have a problem in

Europe. This is not a Renault problem. In the end, aren't we

looking at a fundamental problem for your company and France as a

country, which is about the need to restructure, to make labour markets

more efficient, to make workers more productive, to close down some

of the overcapacity in the business sector? Isn't that what you need to

be doing now? If you are talking about Renault specifically, Renault

do not need restructuring. Renault needs to gain competitiveness in

France. How to do that? Many things depend on the government, which the

government has already announced their intention to increase

flexibility, increase competitiveness with some specific

measures. We are happy we are not talking about it, but acting on it.

We have competitiveness that we have to do as a car company by

negotiating internally with our unions, that is taking place now.

That is allowing Renault in France to be more competitive. It is not

just about government and company, it is a combination of both. This

is the nub of the issue. In France it is extraordinarily difficult to

tell the unions to change. We have seen her show try and close down

one of its big plant. -- Peugeot. It has caused huge political

controversy. Will you say to the unions, the French government, you

also need to shed a significant whatever

whatever is needed by the company. I am not going to do it if it is

not needed. Coming back to your questions, you need to shed this

and that, you cannot put the same menu for car manufacturers. Every

car manufacturer has different problems to face. Our problems go

through negotiations with unions. We should come to a conclusion in

January. Will the work force be slimmed down? We are in the middle

of a negotiation, I cannot tell you the conclusion. We are going to

gain competitiveness. When you gain competitiveness, it means a lot of

things in terms of productivity, flexibility, in terms of using

people on different sides depending on the evolution of the market.

This is what I see, you talk about competitiveness, the French

government, which has a 15% stake in Renault, the French government

takes making statements like from the industry minister, who says we

want Renault to become more French. He is putting enormous pressure on

you to ramp up investment. minister of industry in any country

who does not say the same thing... You said, yet acknowledged that

Renault can produce a model 10% cheaper in Turkey than in a French

plan. Your message to the industry minister in Paris, why would we ran

up investment in France when we can make the same cars much cheaper in

Turkey and sell them to French people? I am glad you are running

for my job. We have capacities that are established. Outplayed in

Turkey is false. -- our plant in Turkey is full. You have to

consider your existing capacity. Shutting down capacity has a cost,

it is not free. We want a balance between running in the most

efficient way the existing capacity in Europe, at the same time,

increasing capacity is in low cost markets. That allows us to have a

positive cashflow and results. are trying to finesse a very

difficult position you have with the French government. You said not

so long ago, you talked about the fact it is much cheaper to produce

the same car in Turkey. You said, Renault could disappear in its

current form. What did you mean when you said that? Come on, I

would say the same thing for Nissan or any company. It was answering a

question, if you are big enough nothing can happen to you, any

company can disappear if you are not doing the basic things to

remain competitiveness. I want to draw one comparison. When the US

massive car makers, Chrysler, GM, were in trouble 3-4 years ago, the

whole basis of the government stepping in and bailing them out

was that they would have to change fundamentally. You have a close

relationship with the French government, they have a stake in

your company. The message from the French government seems to be, we

will support you and prop you up as long as you do not restructure. As

long as you keep these thousands of jobs in France, even if they do not

make sense any more. Let me correct you, the government did not pour

billions of dollars into Renault. They gave us a line with an

interest rate when all the banks were not giving any loans anymore.

This was reimbursed way before its term. I do not want to give the

impression that the government is pouring money into the car industry.

That did not happen. I do not think the kind of pressure you receive

from the French government is any different to what I'm feeling in

many countries where I'm working. When the government is a

shareholder, it has a double voice. Speaking as the government and as a

shareholder. The difference between Europe and what is happening with

the GM and Chrysler, if you are making losses, your balance sheets

are twisted, now you are in trouble. When you look at the balance sheet

Nissan performs better than Renault? It has had smaller

exposure. Nissan has bigger exposure to China. You said that

you were pleased that the government of Francois Hollande is

taking some measures to help business, corporate tax breaks over

the next three or four years. I put it to you that if you look at the

overall climate under Francois Hollande, think about the

significant tax rises, particularly for the riches French people, if

you look at the message he has delivered on the welfare state, on

employment law, on, for example, the determination to stop companies

from closing down inefficient plants and threatening to national

Wiseton, this is not a business- friendly environment. --

nationalise them. Would you agree? What is important for me is the

Government acts on competitiveness. They must establish a competitive

base. Is this a business-friendly environment in France today? I am a

business person. I do not judge people on that basis. For the

moment, I am watching carefully for the competitiveness lob which has

been passed. I will judge on that. More than any other businessman I

have met, you travel the world, you call yourself a citizen of the

world, rather than a country, how worried you by the lack of

competitiveness in France and Western Europe on the whole? I am

worried about it as long as there is no action about it. My big

concern is that we have a problem, we are talking about it and we are

not acting on it. I feel that we're going to have an action on it so I

feel a little bit more reassured. This is about the Government making

some decisions. Companies have to make decisions. They have to make

specific agreements. What is good now if the situation became so

dramatic that everybody is keen to act. There is no room for another

report, another analysis, another study. We have came to the

conclusion that decisions are being made. Another specific point I want

to raise, you had one very difficult incident at this company

when you and other senior executives became convinced that

some of your colleagues had been selling confidential secrets about

your electric parts to outsiders. You went public with it. Three men

were named and shamed. It then turned out that you were completely

wrong. They had not been selling secrets. Officially, we re-

established the people and corrected what had been done.

was too late to correct the damage you had done to three individuals.

Never too late to do the right thing. It can be too late to do the

right thing. Maybe the right thing you should have done, frankly, is

resigned. These are companies, businesses, you have boards and

shareholders. They decide not on the function of unemotional burst

on an incident but the true value of the company, the value of the

business. Everything which happened at Renault in this unfortunate set

of events went in the best interest of the shareholders. You said there

was more trouble proof that you were 100 % sure that these guys

were guilty. It is a question of judgment. In the end, did you

exhibit such poor judgment that the faith of the staff and the public

in your leadership of the company was under threat? When you are

reliant on information coming from people that you trust, your make a

judgment based on that information. It was not the judgment that was

wrong, it was the information. That is a different story. A final

thought on the way in which you handled an extremely burdensome

corporate responsibility, you are the CEO of Renault. You are also

the CEO of Nissan. There is an alliance between the two. You have

to spend a substantial chunk of your time every year in Japan and a

substantial chunk in Paris as well as a substantial chunk looking

after global interests. Is that possible? Is this unique alliance,

it is not a merger but an alliance, is it in the best interests of the

companies? My mandate at Nissan comes at the two years to renewal.

My mandate at Renault comes every four years to renewal. When I was

elected to become the CEO of Renault, people knew when they were

voting that I would be taking those jobs. I was already the CEO of

Nissan. And as you know, I was the main artisan of the turnaround of

Nissan in 1999. I have been running the company for years. The

shareholders voted knowing. That is what intrigues me. You succeeded in

turning around Nissan. You have not succeeded in turning around Renault.

You have finally found a job that is too tough for you. Doing the two

at once is too tough. I don't think that you should link both.

cannot help it. For the last four years, you have to admit that there

have been enough outside events, head wins, particularly against

journalist car manufacturers in Europe between the crisis of 2008

to the eurozone crisis to the slump in Europe. How come these guys turn

around Nissan? To acknowledge the performance is good. It is growing

well with an exceptional balance sheet. How come these guys perform

so well and, at the same time, having such an average

performance... That is what everybody is asking. It is because

it is tough in Europe and that is it. It is not because I am all the

sudden biased and I go to Japan and an excellent. Maybe you and, let's

be honest, it is down to you, you are the boss, units and strategic

errors. You have not put enough resources, when it comes to Renault

in particular, into China, India, other emerging markets. You are big

in Russia and Brazil which you have not, particularly in China, been

quick enough to respond to the changing world. This is one

interpretation of the fact. Is it true? In 2000, when Nissan into

China and 2002, we made the decision, I made the decision at

that moment with the former CEO of rare not to say, let's not going to

the same market. Let's divide. -- of Renault. Renault went to Russia,

India, Brazil. Nissan went to China. That is one of the reason is that

Renault was not yet in China. bottom line is that Renault, and we

have spoken about her French it is, it has to be much less European and

much more focused on all of these emerging markets. It has to work in

China. That is what has been done for the next development. Russia,

Brazil, Renault is growing there. They have announced a project in

China for stopped a final thought about the future and about growth.

-- China. You, Carlos Ghosn, have made a massive bet on electric

vehicles. Look at the figures. The Nissan model sells maybe 30,000

worldwide. You have got a tiny fraction of 1% of the global car

market in electric vehicles. You were telling the world that by 2016

there will be 1.5 million and that very soon after 10 %, you say, of

all car sales will be electric vehicles. That has to be fantasy.

like to be present things. I sit and 2020, 10 % of the market when

the car is available. It is different when there is no car.

country in the world it could be possible. 10 % of the market in the

markets where you have an offer on electric cars. That is the US,

China, Japan. It is excluding countries like Brazil, India.

said that by a 2020, 10 % of all cars and the US and China will be a

letter. 10 % of the market. That is what I said. When you announce an

innovation, the first and you have a blip in cells, you see it is a

mistake. That is not want to work. It is about persistence. It is

about continuing to enhance the product and listened to what the

consumers are saying. Why they are not buying it and pursuits. We will

continue to pursue. If you are a shareholder, there must, point are

you look at the evidence and say you have got it wrong. I do not

think we can say that. Getting this one wrong means there is no future

for the electric car for this industry. That is what it means. I

am not ready to do that. A lot of people will come to electric cars,

little by little. The only question is, how fast is it going to

increase? This is not 30 years down the road. For you, not turning back

on your strategy. No, no turning back. On the contrary, it is

sticking to it, seeing the potential, modifying the product. I

think the product will have new infrastructure. It is one of the

reasons people are not buying new electric cars, they are worried

about the existence of the infrastructure. They want to know

where they're going to be charging their car if they leave their home

or leave the office. We're going market by market and sold and the