Even for Carlos Ghosn, the supremely confident CEO of the Renault-Nissan automotive alliance, criticism sometimes hurts.

In those moments, he turns to a pile of boxes filled with news clippings documenting his stewardship of Japanese automaker Nissan <7201.T>, a debt-ridden company more than a decade ago that some feared was heading toward bankruptcy.

From time to time, when I'm a little bit discouraged, I go back, open one box, and read some of the articles from 1999, the Brazilian-born Ghosn told reporters one June afternoon in 2007, after a grilling from shareholders unhappy with Nissan's fall in profits.

I say, 'Wow, I prefer to be here now than back then.

Ghosn might want to rummage through those boxes again.

This time the scrutiny is over the French end of the Franco-Japanese automotive alliance, at Renault where he was named CEO six years ago.

Although the 12-year Franco-Japanese partnership is often viewed as a success story in an industry littered with botched tie-ups, Renault investors seem less than thrilled about it lately.

On February 10, Ghosn (rhymes with loan) unveiled a new six-year business plan for Renault, promising to generate more cash and profits to reward shareholders. To his surprise, investors gave it the thumbs-down, and Renault's shares have fallen 12 percent since the announcement.

Investors were mostly unhappy that Ghosn had failed to address one of their biggest gripes: the financial structure of the Renault-Nissan alliance.

It is a complicated structure.

Renault has $20 billion of its capital in a 43.4 percent share in Nissan. That exceeds Renault's own market capitalization of $18 billion. If the point was to have a partnership that the two sides could benefit from, Renault could do it with a smaller stake in Nissan and put the cash to better use, the investors argued.

It's a fair challenge, Ghosn told Reuters in an interview on Friday in his 21st floor corner office at Nissan's global headquarters in the Japanese port city of Yokohama. He said he was surprised by the market's negative reaction to his plan for Renault, and stressed he would make the necessary changes to the alliance's capital structure within three years.

Over the course of a far-ranging interview, Ghosn exuded his signature flair and confidence, speaking rapidly and occasionally shifting forward in his armchair to emphasize a point. Behind him was a small mockup of an Infiniti M37S sedan, and a Picasso hung on one wall.

Judging from his ability to cite the latest currency rates and oil prices, it's clear he always has an eye on the markets. A Bloomberg terminal sits on his desk next to a set of keys to a Nissan GT-R sports car and the brand new, all-electric Leaf.

But his decision-making was based on a longer horizon, he said.

You have to be careful that at the end of the day, by trying to do more in the short-term you don't end up destroying what had been delivering so much result on the mid-term and long-term, he said, referring to the billions of dollars in development and other costs the companies had saved.

And a merger? Out of the question, Ghosn declared.

It is not validated by any example in the car industry that this works. Not one example. And saying something different is just rubbish.


His insistence on that point may well stem from his initial experience at Nissan. As the first non-Japanese president of an automaker in the rigid corporate culture of Japan, he seemed unafraid to break the mold, as he set about turning around a company that had lost money for most of the 1990s. He was even criticized for not mastering the customary Japanese bow.

Nothing succeeds like success, however. As Nissan grew increasingly profitable, and the dividends started flowing, the accolades started coming. He even became the subject of a 160-page graphic novel, the first non-Japanese to be featured in a stylized Japanese illustrated manga book.

Tackling a hidebound corporate culture had become Ghosn's forte. Renault hired him as one of its top executives in 1996 from France-based Michelin, where he had risen to become CEO of the tire maker's North America operations. He had established his reputation as a turnaround artist there after engineering a merger with U.S. tire maker Uniroyal that effectively doubled the size of his Michelin division.

His French connection drew him into Renault, in which the French government still had a controlling stake at that time. Fortune magazine once quoted Ghosn as saying about Renault in those days that the company put a premium on the fine phrases and arcane knowledge and wasted time on discussions about everything and nothing.

Renault flourished during Ghosn's time as executive vice president. By around 2005 it had become the best-selling brand in Western Europe and the French government's stake kept dwindling to its current 15 percent.

But now Renault's shareholders are grumbling again, after seeing its share price tumble more than 30 percent since Ghosn assumed the CEO's post in May 2005. It seemed to underscore his reputation as an expert at fixing a broken company but less skilled at running a company whose future is more secure.

Ghosn works best in crisis mode, than in cruising mode, said UBS Securities auto analyst Tatsuo Yoshida.

Ghosn, who turns 57 on March 9, spends a third of his time in Japan, a third in France and the rest flying around the world to check on the companies' overseas operations and networking with dignitaries at international conferences.

He said his current dual-CEO title works well, despite the carping about Renault needing more of his attention.

It guarantees partnership, the same level of decision (making), he told Reuters, indicating his desire to extend his two-year term at Nissan this year.

Some analysts and investors beg to differ, saying Renault and Nissan's interests might be divergent at times due to an imbalance in the alliance. While Nissan has the bigger market capitalization, it is technically controlled by Renault. Nissan holds just 15 percent of Renault.

When the Renault-Nissan alliance conducted an equity swap of an equal cross-shareholding with Daimler last year, many felt Nissan got dragged into the deal since the projects mostly involved Renault and Daimler. Then again, Ghosn is Nissan's biggest individual shareholder, with stock worth more than $30 million.

An industrial espionage scandal that has engulfed Renault has been another headache for Ghosn. French intelligence services are investigating a possible Chinese connection. Renault, which has fired three executives -- all of whom say they have done nothing wrong -- has come under fire for its handling of the case, after it conducted an internal investigation before informing the authorities. Ghosn has insistedRenault's actions were justified. When a company is facing a problem, it always takes a stance and takes a decision, but at the same time it wants to make sure of what it can learn from it, what enhancements it can make. Obviously I cannot tell you more because we are waiting for French justice to take a position.

But some analysts say his split focus on two separate companies, each embedded in their particular cultures, is a huge challenge for him.

Any way you slice it, it's strange for the same person to be CEO at both the controlling company and the controlled, Alliance Berstein Senior Vice President Takaki Nakanishi said. They say governance is sound, but sometimes you're left wondering whether that's really the case.

Some have even suggested that the best thing Ghosn could do for Renault's share price is to step down as CEO.

I think on the whole, investors would view it as a positive were Ghosn to step away from the day-to-day running of the business, particularly if there were a person like (COO Patrick) Pelata responsible for Renault, Barclays Capital analyst Kristina Church said.

Ghosn, who is of Lebanese descent and speaks four languages, enjoys a far better reputation in Japan, where he is still remembered as Nissan's Le Cost Killer. His own turnaround there after that rough start was validated when shareholders signed off on his $10 million salary in 2009.


Thanks to Ghosn's aggressive drive into emerging markets such as China, Nissan is looking at a banner year. Lately, though, investor optimism has been more guarded. The recovery in U.S. markets could allow rivals Toyota Motor <7203.T> and Honda Motor <7267.T> to speed ahead.

We're past the cost-cutting stage, and when you look at the medium- to longer-term business, it's uncertain where the growth for Nissan will come from, said Kazutaka Oshima, president of Tokyo-based Rakuten Investment Management.

One of Nissan's biggest problems is that American car buyers don't see its brand as all that attractive. Last year, Interbrand ranked Toyota's <.N225> brand value 11th in its annual survey of global companies, down three spots following its recall troubles.

Among mass-market automakers, Honda came next, in 20th place, followed by Ford Motor , Volkswagen and Hyundai Motor <005380.KS>. Nissan didn't even make it into the top 100. That helps explain why Nissan spends $1,000 more in discounts and other incentives to sell each car, on average, than Toyota or Honda in the United States.

Take the Sentra. What's the draw?, Alliance Bernstein's Nakanishi said. It's super cheap. If you want something cheap and cool, you can have an (Hyundai) Elantra.

Ghosn is the first to agree the brand needs a boost.

Nissan's aim in reviving the GT-R sports car in 2007 was to do just that. In 2009, it was Motor Trend magazine's Car of the Year.

Ghosn is counting on the Leaf electric car, which hit car showrooms in December, to add even more luster to the brand. The Leaf helped Nissan place fourth in Fast Company magazine's ranking of most innovative companies for 2011. Only Apple, Twitter and Facebook were higher.

Starting in April, Ghosn's new initiative to combine the branding, marketing and communications functions will be up and running. Raising the brand's profile will likely figure prominently in Nissan's next mid-term business plan, due by early May.

Renault also included a re-branding initiative in its growth plan, centered on a fresh look from its new, young designer, Laurens van den Acker, hired from Mazda Motor in 2009.

You can rewrite stories through products, Ghosn said. Look at Apple. They rewrote their story. They came with the products, and the products allowed them to rewrite their story. It's possible.

If he can't get a rewrite for the Nissan-Renault brand story, maybe he could delve into those boxes of news clippings again for comfort.

(Additional reporting by Helen Massy-Beresford in Paris; editing by Bill Tarrant)