Car veteran, done with Nissan CEO post, seeks to prod France about Renault's future

By Sean McLain in Tokyo and Eric Sylvers in Milan 

It took Carlos Ghosn nearly two decades to turn over the helm of Nissan Motor Co. to a successor. At 62 years old, he has far less time to check off a task he has yet to complete: put the French government in its place.

Mr. Ghosn's decision to step down as Nissan's chief executive and hand control of the Japanese auto maker over to Hiroto Saikawa came shortly after Mr. Saikawa was named co-CEO last year. The move comes as the alliance Mr. Ghosn architected in 1999 with France's Renault SA faces an inflection point with French elections taking place in coming months.

Mr. Ghosn continues to oversee the Renault-Nissan partnership, which expanded last year with the $2.3 billion purchase of control of Mitsubishi Motors Corp. and is anchored in a cross-shareholding between the Japanese and French auto makers that keeps various operations at a distance. Mr. Ghosn prizes this independence, keeping separate briefcases for Renault and Nissan work.

With the Mitsubishi addition, the alliance's volume nears 10 million vehicles annually -- placing it neck-and-neck with the three largest auto makers. The $4.5 billion in synergies reported by Renault-Nissan in 2015 is poised to grow once Mitsubishi is integrated.

To truly operate like Toyota Motor Corp., Volkswagen AG or General Motors Co., however, Mr. Ghosn needs to combine his Renault and Nissan briefcases into one consolidated bag. "The ultimate target is, at one point, the two groups will merge," Julie Boote, a Pelham Smithers Associates auto analyst, said.

Mr. Ghosn, speaking in an interview Thursday, said a merger is off the table as long as French officials see Renault as a national champion, with interests that are separate from the Japanese partners. "Nissan has been very clear during discussions with the French state that they are not going further in terms of a merger, or anything else, with the French state as a shareholder of Renault."

A Renault boardroom battle in 2015 was sparked by the former French Economy Minister Emmanuel Macron's move to increase the government's stake to 20% from 15%, and it nearly upended the alliance. The move spooked Nissan investors as it boosted France's voting rights, and showed the influence Mr. Macron could again flex in the future if he wins his bid to become France's next president.

Mr. Ghosn, a product of an elite French education, understands navigating the political realities requires a delicate hand, but also knows it puts him at a disadvantage to some of his peers. "We have a market logic, they have a state logic," he said. "Obviously it requires a lot of attention."

Renault is profitable, with income rising by a fifth in 2016 to EUR3.4 billion ($3.6 billion) after a large loss from the previous year booked on Russian operations was removed and Europe sales improved. German auto makers, with strong luxury operations in China and the U.S., dwarf those numbers.

Renault doesn't break out profit by region, but half of its black ink came from its stake in Nissan, underscoring the importance of Nissan's strong position in the lucrative U.S. market. European auto makers struggle to make money in even the best of times.

Mr. Ghosn appears far from retirement. Asked about leaving his job, Mr. Ghosn said "not yet." There is only one certainty, that every year you get older." Renault's bylaws require that he retire when he turns 65.

Still the executive is known to be a workaholic, logging hundreds of hours aboard his private jet every month, shuttling between Paris, Japan and the rest of the world.

He said he now plans to spend more time in Amsterdam, where the alliance is based. Unlike the Nissan-Renault of two decades ago, which was competing against weakened European competitors and Detroit car companies struggling to stay afloat, Nissan, Renault and Mitsubishi face a tough battlefield.

Among the emerging threats is Peugeot, run by a former lieutenant of Mr. Ghosn's named Carlos Tavares. Taking the French rival's reins in 2014 as Peugeot was skidding toward bankruptcy, Mr. Tavares quickly returned the company to profit and is now bidding on GM's Opel unit in Germany, which would expand volume by about 33% or one million vehicles.

GM's move to dump Opel, a money loser since the 1990s, underscores the Detroit company's renewed focus on growing margins instead of market share. Armed with some of the industry's biggest profits and a steady flow of cash, GM CEO Mary Barra is positioning the Detroit auto giant to outduel Renault-Nissan, Volkswagen and Toyota in the race to develop autonomous cars.

In addition to confronting French ownership (and French unions that make cost-cutting tough), Mr. Ghosn says it is time to review the foundation he has been laying since the Renault-Nissan alliance was formed.

"We need to make sure the synergies are working and the opportunities are being acted on and it is benefiting each one of the companies," he said. "That's why I'm concentrating on the alliance."

One move Mr. Ghosn is also re-evaluating is the company's partnership with Daimler AG, the German owner of Mercedes-Benz that is run by another longtime CEO, Dieter Zetsche.

Daimler and Renault-Nissan have been working on products since 2010 together, including jointly developing city cars and pickup trucks. Many analysts have speculated Messrs. Zetsche and Ghosn may someday forge deeper alliances, especially since the companies have been working hard, executives at the companies say, to overcome the inevitable mistrust and reluctance that accompanies a cross-border partnership between companies that are competitors most of the time.

The friendship has developed cracks. Nissan's Infiniti brand and Mercedes have been long developing a small luxury car for production at a shared factory in Mexico, but the sides are re-evaluating whether that specific project makes financial sense.

The setback comes as Mr. Ghosn is working to put Infiniti on the same level as other elite luxury brands, including Toyota's Lexus.

--John D. Stoll in Detroit contributed to this article.

Write to Sean McLain at sean.mclain@wsj.com and Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

February 24, 2017 02:47 ET (07:47 GMT)