Is Carlos Ghosn right for GM?

A few years ago when Carlos Ghosn was leading Nissan turn around business newspapers were speculating what would happened if Mr. Ghosn would leave Nissan and join GM as its CEO. Some opinions suggested that this move could immediately add $10B to GM's market cap. Now this speculation is closer than ever to becoming reality. Based on Kirk Kerkorian's suggestion GM is starting merger talks with the two companies lead by Carlos Ghosn, Nissan and Renault.

It is difficult to question the success that Mr. Ghosn achieved at Nissan. In 2000 before he came in company lost 7B USD. Since he became the CEO in 2001 company's profitability steadily improved and reached impressive 2.1B USD in FY that ended in March 2006. He has done all the right things, renewed a tired product line, cut jobs where necessary, streamlined production and in the process became a cult figure with books and even comic books written about him.

Unfortunately, i believe Nissan's recovery is only skin deep. I am one of many Nissan car owners that are complaining about quality of the vehicles. Consider this a form of disclosure since i am obviously biased. Even people who have bought Nissan's luxury Infinity vehicles are complaining about poor design and electronic malfunctions. I think Mr. Ghosn focused on design, but sacrificed quality for profitability. Nissan is very profitable with operating margins in excess of 10%, however poor product quality will catch up with the company in the long term. We could be seeing first signs of crumbling with Nissan's June sales falling 19% at the time when both Honda and Toyota continued to show gains.

Mr. Ghosn now has two jobs as a CEO of Nissan and Renault. He may be an excellent turn around artist but i don't think he is a good long term operator. While it is early, he is still yet to show significant progress at Renault and could be spreading himself to thin. It is difficult enough to run one car company but running two, not even talking about three, could prove impossible for any man.

GM has a solid history of destroying shareholder's value. If someone would invest money into the company in the '50s they would actually lose money over this time while S&P increased more than 10 times. I believe the potential link up with Carlos Ghosn is another wrong step in the direction GM is too used to going.