‘We’re here to learn frugal engineering’

It’s rare for a corporate chief to command a fan following similar to that of a rock star. Carlos Ghosn, president and chief executive of Renault and Nissan, manages that, and not the least due to any of his out-of-boardroom antics. He has admirers across continents — from college girls, housewives and corporate head honchos to, of course, journalists.

Born in Brazil to Lebanese parents, Ghosn grew up in Beirut and studied in France, only to work in three continents. Ghosn gained celebrity status after he made Nissan profitable. From a debt of $20 billion and only three of its 48 models profitable, in one year, he delivered a net profit of $2.7 billion from a loss of $6.1 billion in the previous year.

A self-confessed buff of Indian ingenuity and “frugal engineering” skills, Ghosn is in the country to launch the Logan range of passenger cars, which is being manufactured by its 49:51 joint venture Mahindra Renault. Ghosn interacted with the media at Mahindra & Mahindra’s management training campus in Nashik. Excerpts:

On the role of India in Renault Commitment 2009

Our Commitment 2009 (unveiled in February 2006) has three parts — position the next Laguna (car) among the top models in its segment in terms of product and service, sell an additional 8,00,000 units annually (sold 2.5 million vehicles in 2005), and take operating margins to 6% (vs 3.2% in 2005, and 2.5% in 2006).

India would be key to this goal since of the 8,00,000 additional units, 50,000 would come from India. On the operating margins front, it (Logan launch in India), would have a positive impact, though it (Indian margins) would be lower than 6% initially.

Would breakeven happen in the first year?

At 30,000 to 32,000 units a year, we should be able to break even. If we break even in the first year itself, it would be a miracle and I would give a Nobel prize to them (the Mahindra Renault team)! I am optimistic of a profitable January -December 2008.

On Nissan’s India plans

Nissan and Suzuki (Maruti Udyog) have an OE (original equipment) arrangement for the exports market. Nissan is also part of the three way manufacturing alliance with Renault and Mahindra for the new plant in Chennai.

For marketing, we most likely would have an Indian partner. Just because Renault has a tie-up with Mahindra, it doesn’t necessarily mean that Nissan, too, would. Both the companies would have to negotiate and it could happen.

But don't be surprised if it doesn't. Nissan would enter the small-car segment and bring two platforms to India. Initially, products rolling out of the Chennai unit would also be for the exports market and later for  domestic market.

Will future Renault derivatives be rolled out by the JV?

As of now, the JV deal is to manufacture one more Logan derivative. Currently we are not planning to bring any non-Logan cars here, but there are lots of Renault cars that could be bought here. Eighty per cent of the two million cars sold here are small cars, but the other 20% is also growing rapidly. Sometime in the future we could bring in our other products here.  The current JV is a not a JV for Logan only. It's a JV to learn the Indian market. We are here to learn about frugal engineering. Scorpio is a good example of frugalness and we want to capture that mindset.

Will equity structure with the M&M remain the same if you bring in  other portfolio?

It (equity split) would be discussed at the end. You don't start a discussion with equity structure. It depends on what each partner brings to the table.

On sourcing from India

Yes, we plan to source from India.  If Indian sourcing is about 30% cheaper than Europe or Japan, why should we forgo that value if we can access it? But issues like infrastructure and government facilitation is the key.

On the Logan design

I prefer a not-so-attractive car that sells well than an attractive car that sells less. People who are buying Logan are looking for a family car with lots of space and not necessarily for racing. However we take feedback from customers. Second generation of Logan would address concerns.

On Indian companies' engineering skills

We are impressed by their frugal engineering. We don't know how to manufacture a $5,000 car in Western Europe. Indian companies like Mahindra, Tata Motors, (Ashok) Leyland, Bajaj Auto are doing a wonderful job are doing a great job and why should we reinvent the wheel when we can simply learn from them. Bajaj sells three wheelers for $2,000 and I would lose my shirt if I try to do that. Only an Indian company can achieve that kind of thing. If I have to fight on cost, I would rather partner with an Indian company.

On taking M&M as a partner for markets where right-hand drive version of Logan will be launched

Logan in India is the first right-hand drive version of the car globally. It is possible that M&M could partner us in markets where we deicide to launch the right-hand version. Whenever we decide to do that, we will talk to the Mahindras.