After exhausting negotiations with General Motors Corp. led to nothing, Carlos Ghosn, the chief executive of Nissan and Renault, is retreating from the search for a North American merger partner — for the time being.
Instead, Ghosn, speaking to the Detroit Economic Club, said he will focus efforts on improving earnings at the two automakers that he oversees. Although the Renault brand has not been seen on U.S. streets since the days of the LeCar, the U.S. market is vital to the Nissan brand because it derives 50% of its profits in North America. In order to maintain those earnings and market share, Nissan has redesigned all three of its U.S. sedans for the 2007 model year, and introduced a sporty sub-compact car called the Versa, which vaguely resembles the LeCar. Nissan's other U.S. brand Infiniti also is amid a series of product roll outs. A merger or acquisition would not only detract from the press coverage of the new products, but would also steal Ghosn's attention from overseeing the launches.
Nonetheless, Nissan's reliance on the North American market illustrates why Ghosn's waiting game will be short lived. Nissan will either have to build new factories to keep up with demand, or will have to buy them. Alternatively, there is a third option: rely less heavily on North American sales. If Nissan can't add North American facilities, the third option is indeed a viable one. Nissan has room to grow in China, India, Russia and other parts of Asia. Nissan trucks and small cars such as the Tiida, Versa's sibling, are already popular in South America.
Ghosn also revealed that he is keeping close tabs on how the U.S. Big Three are going to deal with legacy costs because as Nissan expands production in North America, it will face similar issues in about a decade.—Matthew Wurtzel
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