Nissan-Renault's Ghosn Supports Bailout, Predicts Industry Consolidation, at L.A. Show
November 19, 2008
By Danny King
LOS ANGELES -- The U.S. government's proposed $25 billion bailout of American automakers is essential for investment in electric vehicles and other alternative-power 
initiatives, said Carlos Ghosn, CEO at Nissan Motor Co. and Renault SA, speaking at the Los Angeles auto show Wednesday.
Ghosn added that consolidation in the auto industry is a likely result of the current financial crisis though he said Nissan won't try to buy Chrysler or any other car company in the near future.
"We're all in the same situation. The financial market is absolutely not lending for long term," Ghosn said of the lending crisis requiring the bailout. "Do you want to wait two more years? I don't think it's going to make sense."
Such a bailout, being requested in the form of bridge loans, would help domestic auto companies whose sales have plummeted as a result of the U.S. economic slowdown, the spike in gas prices earlier in the year and a credit crisis that's made it more difficult for prospective buyers to qualify for auto loans. U.S. auto sales last month fell 32 percent from a year earlier. GM sales dropped 45 percent while Chrysler and Ford sales declined 35 percent and 29 percent, respectively. GM said it was the worst monthly sales rate in 26 years.
On Tuesday and Wednesday, GM's Rick Wagoner, Chrysler's Robert Nardelli and Ford's Alan Mulally testified before U.S. Congressional committees that the U.S. government should fund a $25 billion bailout or risk further damage to a sluggish economy, which last month saw consumer prices have the largest single-month drop in more than 60 years.
Many Democratic members of Congress as well as President-Elect Barack Obama have supported using part of the government's $700 billion financial-aid package to provide funding for the U.S.'s three largest automobile companies while many Republicans have opposed such a measure.
Many industry analysts have predicted that, in the absence of a bailout, one of the three largest U.S. automakers is likely to disappear. Both GM and Ford said this month that its third-quarter operating loss, excluding some one-time items, widened while each company burned through more than $6 billion of cash.
"I don't think anybody has a clue if this slump's going to go through 2009, 2010," said Ghosn, whose own company last month cut its profit forecast for the year ending March 31 after its U.S. auto sales dropped 33 percent in October. "In times of financial crisis, the likelihood for industry consolidation increases. We have already seen it in the airline and banking industries. We have no reason to think this industry's an exception."
Ghosn also said agreements in which car companies make certain vehicles for each other were good for the industry because they can free up investment dollars for initiatives such as all-electric, zero-emissions vehicles, which he called "the end game."
Nissan and Chrysler in April completed an agreement in which Nissan would build two small car models for Chrysler to sell during the next two years in South America, North America and parts of Europe while Chrysler would build a full-size pickup truck with a Nissan badge to be sold in North America in 2011.
Still, Ghosn said Nissan, which had merger talks with GM two years ago, was unlikely to make an acquisition bid for Chrysler in the near future. Last year, private-equity firm Cerberus Capital Management bought 80 percent of Chrysler from DaimlerChrysler for about $7.4 billion.
"Until we have some kind of smoothening normalization of the financial market, I don't think you're going to see any strategic initiative of anybody trying to get cash out of his own business and trying to establish alliances and acquisitions," said Ghosn. "We need to take care of Nissan and its cash flow until the storm is gone."
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