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Ghosn drive to make Nissan into top player

Renault-Nissan CEO Carlos Ghosn speaks to the press in Tokyo on Oct.20.

TOKYO -- After a few years of keeping a low profile, Carlos Ghosn is back in the media spotlight. The go-getting chief executive of the Renault-Nissan group is now embarking on the mission of leading the newly expanded alliance into the ranks of the biggest and strongest players in the global auto market.

In the first move toward the ambitious goal, Ghosn recently announced that he will serve as Mitsubishi Motors' chairman after Nissan Motor completes its 237 billion yen ($2.27 billion) acquisition of a 34% stake in the embattled domestic rival.

With the competitive landscape in the world's car market becoming increasingly dynamic and complex, Ghosn is not comfortable with how Nissan is doing. He views the newly acquired controlling stake in the scandal-wracked Mitsubishi Motors as a potential springboard for the group's leap to the top.

The opportunity for Ghosn to pull off a new strategic feat came in mid-April, when Mitsubishi Motors was in danger of being acquired by a cash-flush Chinese or Indian powerhouse.

After it was hit by a fuel economy data falsification scandal, Mitsubishi stock went into a free fall. While it did not face an immediate bankruptcy, the carmaker was at risk of becoming the target of a hostile takeover by an Asian giant with massive financial muscle.

Alarmed by this prospect, Osamu Masuko, Mitsubishi Motors' chairman and president, sought a rescue by Nissan. Ghosn immediately accepted Masuko's request and offered to bail out the troubled company. There are several reasons for his quick, audacious decision.

For one, Nissan is unlikely to achieve the key management goals under its "Power 88" medium-term business plan for the six years through March 2017. The plan calls for gaining an 8% share in the global market and an 8% operating profit margin.

Nissan's operating margin stands at around 7%, with little chance for achieving the 8% goal.

This could be a major blow to Ghosn's leadership because he has been trying to stir up enthusiasm among employees by casting such goals as "commitments."

Ghosn's strategy seems to have started losing its effectiveness. In an attempt to boost Nissan's technological edge, Ghosn set a target of cumulative sales of 1.5 million electric vehicles by Nissan and Renault during the period of the six-year business plan.

But sales of Nissan's mainstay electric vehicle, the Leaf, have totaled just over 200,000 units. Nissan has lost its leading position in the electric car race to Tesla Motors.

In 2012, Nissan revived its Datsun brand to rev up its strategy of expanding in emerging markets. The company rolled out Datsun brand models in India and Indonesia in 2014 with a lot of fanfare. But they have so far made no significant contribution to Nissan's performance in these fast-growing markets.

Nissan has also tried to spruce up its Infiniti luxury brand. It relocated the brand's headquarters to Hong Kong in 2012 and headhunted Johan de Nysschen from Audi to lead the division. But the new Infiniti boss left Nissan in barely two years amid disagreements over the business strategy for the brand.

Nissan is also struggling to hold its own against competitors in the Japanese market. Despite its efforts to become the No. 2 carmaker in Japan, Nissan has been stuck in fifth position in market share, trailing Toyota Motor, Honda Motor, Suzuki Motor and Daihatsu Motor.

Nissan boasts the largest share in China, the world's biggest auto market, among Japanese automakers, but faces growing competition from rivals such as Honda, which has announced a plan to build its sixth plant in the country.

Ghosn recently said he is not content with Nissan's performance both in Japan and globally.

Initially, it was rumored that Nissan's No. 2 executive, Vice Chairman Hiroto Saikawa, would head Mitsubishi Motors. But Ghosn has apparently decided to lead the turnaround of the car manufacturer himself as part of his efforts to revitalize Nissan's own performance.

Under the alliance, Nissan will receive Mitsubishi Motors' competitive plug-in hybrid technology. Nissan will also sell Mitsubishi's new small multipurpose vehicles under the Nissan brand in Southeast Asia, where Nissan has been struggling to expand its presence.

Mitsubishi Motors is also considering cooperation with Renault in the development of diesel engines.

During less than half a year since the announcement of the Nissan-Mitsubishi deal, Ghosn has unveiled a raft of specific ideas for generating quickly vital synergies among the three group members.

Ghosn has long been entertaining the ambition to hold the top post at the world's No. 1 carmaker. That's why he once made a failed attempt to engineer a blockbuster alliance between the Renault-Nissan group and General Motors with the help of U.S. investor Kirk Kerkorian.

A decade on, Ghosn has managed to put the group on the track to sell 10 million vehicles worldwide in fiscal 2016 by buying Mitsubishi Motors.

The Renault-Nissan-Mitsubishi group is poised to join the so-called 10 million club, which also includes Toyota, Volkswagen and GM.

As a result, Ghosn is shifting his strategic priority from partnering for upsizing.

His new goal is to make the group the world's strongest alliance, driven by high-powered synergy among its members.


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