Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: One of the biggest stories of the week comes from Japan.
Speaker 2: Honda and Nissan are in talks to form a merger
Speaker 2: to help withstand the challenges in the auto industry. The
Speaker 2: talks accelerated after fox Conn entered the fray, and we
Speaker 2: have breaking news this morning that they are putting their
Speaker 2: interest on hold joining us now. Is the architect behind
Speaker 2: NISA's turnaround, the man known as lucost Killer, Carlosco and
Speaker 2: the former chairman CEO of Reno Nissan Mitsubishi, who has
Speaker 2: worked as the CEO from two thousand and one to
Speaker 2: twenty seventeen. Should just be said that mister Gon is
Speaker 2: currently suing Nissan for a billion dollars in defamation after
Speaker 2: his arrest in Japan in November twenty eighteen on charges
Speaker 2: of financial misconduct, which he denies. Mister go, good morning.
Speaker 2: Great to have you with Monser, Great to have you.
Speaker 2: So Nissan, Honda, Nissan, Nissing going after Honda. Is this
Speaker 2: a pragmatic deal, carlos or a desperate roll of the dice?
Speaker 3: Now, in my opinion, it's a desperate move. It's not
Speaker 3: a pragmatic deal because Frankly, the synergy between the two companies.
Speaker 1: Are difficult to find.
Speaker 3: There is practically no complementarity between the two companies that
Speaker 3: are on the same markets. They are the same products,
Speaker 3: the brands are very very similar. So in a certain way,
Speaker 3: from one side, Nissan, it's a desperate move to try
Speaker 3: to find the future, and from the other side Honda,
Speaker 3: which if I understand well that we're not very excited
Speaker 3: about this move, but you know, you have to count
Speaker 3: with METI in Japan that me and the METI had
Speaker 3: the big had the big say into it. So at
Speaker 3: the end of the day, they're trying to figure out
Speaker 3: something that could marry the short term problems of Nissan
Speaker 3: and the long term vision of Honda.
Speaker 2: Do you think Nissan is being put Do you think
Speaker 2: Honda is being pushed into this still by the economy industry?
Speaker 2: There's politics pushing the still colors rather than the value.
Speaker 1: Of the deal. Without any doubt.
Speaker 3: For me, that mean, having lived in Japan for so
Speaker 3: many years, I understand how influence can the mad TV
Speaker 3: and I can tell you that mean from all the
Speaker 3: data that they received about the performance of Nissan, which
Speaker 3: has been miserable for the last at least for the
Speaker 3: last two to three years. They have cash problem, they
Speaker 3: have investment problems. They're being really hammered in the United States.
Speaker 3: They got practically out of Europe, They're being challenged in China,
Speaker 3: and there is no plan in front of it.
Speaker 1: So I can tell you that means there is panic
Speaker 1: mode inside.
Speaker 2: Nissan, well very in panic mode. And then it then
Speaker 2: pushes the idea that there's the Economy Ministry as you say,
Speaker 2: are and do whatever it takes.
Speaker 3: Moment for Nissan, yeah, well there is in my opinion,
Speaker 3: there is no industrial logic to it. But as you know,
Speaker 3: there is a moment where you have to choose between
Speaker 3: performance and control. Obviously you can have both, it's the better,
Speaker 3: but there are moments where you have to choose, and
Speaker 3: without any doubt, with the Meki and everything I know
Speaker 3: from it, they prefer control and performance. So they pushed
Speaker 3: Honda into the deal without any doubt.
Speaker 2: With that in mind, Then Carlos, what kind of backstops?
Speaker 2: I mean, you've dealt with the Japanese, You've dealt with NIS,
Speaker 2: and you understand the the metrics to get these organizations together.
Speaker 2: Is the government going to have to deliver backstops? To
Speaker 2: Honda to make this deal work.
Speaker 3: No, I think they got they in a certain way
Speaker 3: try to push Honda onto this deal. Obviously Honda must
Speaker 3: have some kind of benefit out of it, if not
Speaker 3: on the short term, at least on the mid and
Speaker 3: and the long term. But that will be closely monitored
Speaker 3: to make sure that the impact on the Japanese society
Speaker 3: is not going to be too big, because you know,
Speaker 3: when you have two companies of this size and practically
Speaker 3: in the same amount kid with practically the same strengths
Speaker 3: and the same weaknesses. Uh, the they're gonna be a
Speaker 3: lot of costs to be taken out, and they're gonna
Speaker 3: be a lot of duplication to be taken out. So
Speaker 3: this is gonna be closely monitored by the by the
Speaker 3: means you dite.
Speaker 2: The synergies are there, though.
Speaker 3: Well, I can tell you that. I mean it's it's
Speaker 3: on the short term. I don't see too much synergy.
Speaker 3: Obviously you go to the classical one, which is purchasing
Speaker 3: together to try to leverage a better scale. But this
Speaker 3: is something that Nissan has done with real successfully into
Speaker 3: the in the past, except that at this moment it's
Speaker 3: really concentrated in Japan. It's it's three Japanese company which
Speaker 3: have very similar products. The image of the brand are
Speaker 3: not very different from one to the other. I'm including
Speaker 3: Mitsubishi into into it. So it's gonna be very tough.
Speaker 3: But on the long term they can save on future
Speaker 3: investment by doing the investment one time in technology, doing
Speaker 3: it one time and sharing it with three companies.
Speaker 2: Let's just press a little bit more on this. It's
Speaker 2: going to be tough, as you say, to get the synergies.
Speaker 2: Is it's driven by the Ministry of Economy. So there's
Speaker 2: a political dynamic to this. Is this japan creating putting
Speaker 2: two companies together to really try and stand up to
Speaker 2: the competition from China? Is that part of the narrative here?
Speaker 3: Callus without any doubt that it makes a lot of logic.
Speaker 3: Today the Chinese auto maker are on the winning side.
Speaker 3: They are they became, as you know, the largest exporter
Speaker 3: of cars, they are the largest maker of ev they
Speaker 3: are being successful in a lot of new technology. They're
Speaker 3: doing fine cars. So in a certain way, yes, it's
Speaker 3: a defensive mode. It's a defensive mode that's going to
Speaker 3: be trying to shore up the Japanese industry and avoiding
Speaker 3: a cataclysm. First it's social cataclysm in in Japan and
Speaker 3: particularly to try to reinforce these companies on the on
Speaker 3: the foreign markets.
Speaker 2: Fox cornt have put on paused their interest in participating
Speaker 2: in the steel car lost. They had a million with Reno.
Speaker 2: It obviously didn't go according to what they wanted. Is
Speaker 2: there only a japan solution for this? Is there only
Speaker 2: a Japanese savior for Nissan in your view?
Speaker 3: I don't see him for the moment, obviously, in the
Speaker 3: in the team existing today at Nissan, usually you can
Speaker 3: measure the team by the results they get. You know,
Speaker 3: that's the only way you know if somebody is capable
Speaker 3: of doing something. Frankly, when you look at the last
Speaker 3: five years, the results are not a good testimony of
Speaker 3: the strengths of the of the team.
Speaker 1: Will there be a savior? I don't know.
Speaker 3: I know how tough it's going to be, because you
Speaker 3: need to understand that Honda is.
Speaker 1: An engineering organization.
Speaker 3: It's it's very strong in engineering, and Nissa is very
Speaker 3: proud of its own engineering. So the battles here to
Speaker 3: try to decide what technology is going to be adopted
Speaker 3: by the new company or by if it's a merger
Speaker 3: or by the new alliance. I can tell you it's
Speaker 3: going to be very tough. I've been dealing with this
Speaker 3: for many years. I remember when we took control of Mitsubishi.
Speaker 3: Mitsubishi was not afraid of the collaboration with Renal. They
Speaker 3: were afraid of the collaboration of Nissan because they know
Speaker 3: how tough it's going to be when engineers met together.
Speaker 3: And there is this pride of my solution is the
Speaker 3: best solution, which always is an obstacle to develop serious
Speaker 3: synergy for the future.
Speaker 2: Well, of course you're going to have cultural issues when
Speaker 2: it comes even if there are two Japanese firms. I
Speaker 2: think the point I was trying to get to Carlos was,
Speaker 2: do you see the only solution being a Japanese to
Speaker 2: Japanese merger or joint venture. Do you see any possibility
Speaker 2: of an overseas company like Fox cont being allied into
Speaker 2: the allied into this house.
Speaker 3: Well, the approach of Fox Con when I heard about it,
Speaker 3: was very interesting because it is something innovative. It is
Speaker 3: something that would have put Nissan in a completely different.
Speaker 1: Path.
Speaker 3: But the fact that you're telling me now that they
Speaker 3: are posing on it. They are very realistic people. They
Speaker 3: know they cannot do it against the will of the
Speaker 3: government of Japan and particularly of the METI. And now
Speaker 3: you need to know also that in Renau, the French
Speaker 3: state has a big say because they are a very
Speaker 3: influent shareholder in Renault. And I'm sure that the decision
Speaker 3: of pose is coming from the fact that they know
Speaker 3: the met is not very favorable and probably the French
Speaker 3: government doesn't want to upset the Japanese. I've been a
Speaker 3: witness of how much the French government is pending backward
Speaker 3: to please the Japanese in the past.
Speaker 1: Unfortunately.
Speaker 2: Well, look, I know that there's on issues between yourself,
Speaker 2: the Japanese and the French, et cetera. But you have
Speaker 2: a ring sight see at many of those meetings. Is this,
Speaker 2: briefly before we talk about the global auto industry, Carlos,
Speaker 2: is this Renos moment exit? Do you think that that's
Speaker 2: what they hope for or do you think they really
Speaker 2: do want an equity participation?
Speaker 3: Oh no, no, no, I think this alliance has been
Speaker 3: you know, since twenty twenty. It's some surprise. I told
Speaker 3: you that the alliance is a zombie. It's an appearance
Speaker 3: of an alliance. There is an appearance of a collaboration,
Speaker 3: but there was practically no collaboration at all. I think
Speaker 3: what Renald, after having the benediction of the blessing of
Speaker 3: the French government, is trying to maximize its asset inside Nissan.
Speaker 3: That're trying to get the most money out of their share.
Speaker 3: But that will, in my opinion, that would sell. That
Speaker 3: would sell to Honda without any doubt.
Speaker 2: Carlus, It's just broaden the conversation a little bit. You've
Speaker 2: lived to breathe this industry. You've seen the evolution of
Speaker 2: the Chinese electric vehicle market, the strength of the auto
Speaker 2: industry and China become. Are you surprised about how strong
Speaker 2: they become so quickly?
Speaker 1: No, not at all.
Speaker 3: You know, frankly, I've seen the signs of it when
Speaker 3: we entered China, when I was heading Nissan, and we
Speaker 3: entered China in two thousand and three, and we start
Speaker 3: building our plans and organizing the engineering. In a very
Speaker 3: short period of time, I would say seven or eight
Speaker 3: years after we built the plants in China, the Chinese
Speaker 3: plans were at the top of the ranking from all
Speaker 3: our plans. I mean, we were comparing the productivity, the quality,
Speaker 3: the time to market of the Chinese plan compared to
Speaker 3: the Japanese plan, or to the US plans or European plans,
Speaker 3: and the Chinese came to number one. It's a very
Speaker 3: disciplined workforce. They are very, very eager to compete into
Speaker 3: this industry. So I think this industry in the next
Speaker 3: twenty years going to have to deal with the Chinese
Speaker 3: talent and the Chinese Noha.
Speaker 2: Well, College, you were known as Davos Man. I think
Speaker 2: you were the voice of free trade. Every January. The
Speaker 2: world is bracing for our next round of trade disruption
Speaker 2: from Donald Trump. Every CEO of an other company out
Speaker 2: there probably has their own personal thoughts, but they probably
Speaker 2: can't really express them. You can. You're free Now as
Speaker 2: the auto CEOs lineup, what can they not say? What
Speaker 2: do you think they're thinking? But they can't say?
Speaker 3: Look if you I mean, this is an industry which
Speaker 3: is by the definition and global industry. You can survive
Speaker 3: as an automaker if you are restricted from accessing any
Speaker 3: market in the world. Size matters, Investments are huge, economy
Speaker 3: of scale are extremely important. So this industry is living
Speaker 3: on globalism and globalization so I think it's very bad
Speaker 3: news for all the automakers to know that they're going
Speaker 3: to tariffs and they're going to be obstacles for them
Speaker 3: to be present in all the market. This will translate
Speaker 3: into a lot of them having problems and certainly a
Speaker 3: higher price for car in all the markets.
Speaker 2: Do you think you'll see a major auto failure in
Speaker 2: twenty twenty five carors.
Speaker 1: Well, you know there is no auto failure.
Speaker 3: There are, in a certain way, companies that are so
Speaker 3: weak that somebody else comes and buy them. When you
Speaker 3: look at the market capitalization of Nissan today, it's really
Speaker 3: very small, and I can understand that the company like
Speaker 3: foxcon headed by very serious and realistic management, is going
Speaker 3: to say, you know what, instead of us investing to
Speaker 3: do our own electric car, let's buy a car company.
Speaker 3: They're not going to be the only one to try
Speaker 3: to do that. Instead of building something from scratch, you
Speaker 3: can take control at the relatively cheap price of an
Speaker 3: existing car manufacturer, get rid of everything you don't need,
Speaker 3: and really concentrate on what's important for you for the future.
Speaker 3: I'm expecting a lot of moves like this in the future,
Speaker 3: particularly for the weaklings of the crimes
Speaker 2: Carlus Cone, thank you for joining me this morning candid
Speaker 2: conversation Carlos Kone, the former chairman and CEO of Reno
Speaker 2: Nissan Mitsubishi Alliance, who served as the Nissan CEO from
Speaker 2: two thousand and one to twenty seventeen