Carlos Ghosn, the man who turned Nissan around

The plan

When he joined Nissan as COO in June 1999, he was accompanied by a team of thirty French Renault experts. With the help of a Japanese interpreter (and at the same time trying to learn Japanese) he visited all Nissan factories around the world. At the same time, Ghosn installed nine MFPs to analyze Nissan’s problems. These teams were to submit their suggestions within three months.

In October 1999, after the teams did their analysis and presented their proposals to the executive committee, Ghosn was able to announce his strategic plan for the revival of Nissan in a public presentation. At the same time, this plan was simultaneously announced to all 148,000 Nissan employees. In his speech, Ghosn even went so far as to state that Nissan would be debt-free for 2005.

In short, the plan consisted of the following long-delayed drastic measures:

1. Fewer and simpler factories. Nissan had too many factories and was using only 53% of its capacity. Therefore, a reduction in the number of factories was necessary. 5 factories in Japan were to be closed. A taboo in Japan.

2. Reduction of purchasing costs by 20%, which also included a reduction in the number of suppliers (from 1,145 to 600 companies). In his speech he said “We are going to help the [suppliers] that they are going to help us. “

3. 20% reduction in general expenses, including marketing and administrative expenses.

4. Reduce the number of sales subsidiaries in Japan by 20%.

5. Release currently non-strategic assets and apply them to the core of the business to significantly reduce Nissan’s overall debt. This meant ditching most of Nissan’s holdings. For a Japanese company and for Japan itself, this was a shocking announcement because many historical, sentimental and personal ties would be severed. (Ghosn was outraged when he discovered Nissan’s involvement in a competitor, Fuji Heavy Industries, automakers Subaru.)

6. A total staff reduction from 148,000 to 127,000 full-time employees. Of the total of 20,000 layoffs, 16,500 fell in Japan! The only department that did not suffer layoffs was R&D, which was even allowed to hire 500 more employees.

Ghosn saw to it that the plan was very precise, extremely factual, and highly quantified. He even mentioned the deadlines established for each of the objectives to be achieved. The plan left little room for misinterpretation.

His brutal cost-saving remedies are standard shifting practice, but he was able to get people to understand and admit that Nissan had reached a point of no return. He concluded his presentation of the plan with the promise that if he failed in any of the objectives, he would resign! The Japanese were impressed by Ghosn’s public commitment. Probably because of this brave statement he had already conquered the hearts and minds of the Japanese.

The critical success factor

The critical success factor in Ghosn’s successful approach to turning Nissan around was the installation of the nine multifunctional teams (CFTs), which were composed according to his ideas. The task of a CFT was to present recommendations, within their assigned discipline, to the executive committee, within three months. There was no choice due to the state Nissan was in. There were no barriers to recommendations and this was a prerogative rarely given to the middle ranks in Japan. The accepted ideas would be executed by the team that formulated them. This ensured not only realistic ideas but also commitment.

Each team consisted of ten professionals from Nissan and Renault with two leaders selected from senior executive positions representing different disciplines with common ground (eg purchasing and engineering). Each team had a pilot, who acted as secretary, who was responsible for the agenda, research, and dialogue. A CFT could establish sub-teams that would be charged with investigating specific issues in greater depth. At one point, about 500 employees from across the company were mobilized on this project. Despite the use of interpreters, internal communication within the groups was initially difficult due to the languages ​​used, Japanese, French and English. Faced with misunderstandings, Ghosn introduced a small company dictionary containing 40 keywords in English and further encouraged French and Japanese executives to master English.

The results

In 1999 Ghosn had dared to say that Nissan would be debt-free in 2005. The way he worked, his personal commitment, his analytical mind, the quality of his strategic plan, the clarity with which he communicated this plan at all levels of the company. and the confidence that it exuded, resulted in the amazing feat that already one year after its arrival Nissan had a profit of 2.700 million dollars and showed an operating margin of 10.8%! Now, Nissan has even become the world’s most profitable largest automaker.

The future of the Alliance

Now, in 2006, Renault has a 44% stake in Nissan and Nissan has a 10% stake in Renault. Today, Nissan is even more profitable than Renault. The logical goal of the Alliance is to cover the entire world with a minimum of duplication.

The foundation of this successful Alliance, and the success of Carlos Ghosn, is that it is driven by mutual respect, a belief in the value of association, and a refusal to play power games. When Nissan struggled, Renault management was cautious enough to resist the temptation to exploit the power imbalance. Ghosn affirms that: “Within the Alliance we talk about performance, not advantages of scale. Our Alliance is based above all on a continuous search for better performance. Innovation, quality and cost are important because that is where it plays. “.

Right now there is a constant movement of people from Nissan to Renault and back. This continued movement will be invaluable, says Ghosn. It is clear that Renault people with Nissan experience and Nissan employees with Renault experience are valuable assets.

Responding to a reporter, Ghosn says: “Where will we be classified in five or ten years? Frankly, I do not know, nor do I think about our goals in those terms. If we perform well, and I think that ‘We have great potential, so much At Nissan as at Renault, and we allow each of the two companies to do their best, there is no limit to what we can achieve. “

In analyzing Mr. Ghosn’s success, one will find that he applied many factors mentioned in this book. Such as strategic withdrawal concentration (ditching non-strategic holdings, etc.) to create a stronger foundation, or strengthen Nissan’s motivation by setting clear goals and making yourself visible. Then, to make sure he got the right information and ideas, he used aspects of Auftragstaktik like being open to new ideas (fostering initiative). The quotes from Mr. Ghosn listed below give an idea of ​​his thought process. Still, he showed leadership and determination in a remarkably successful way.

In January 2004, the Financial Times published its annual list of the world’s most respected business leaders in 2003 and Carlos Ghosn was ranked fourth.

After spending six years at Nissan on April 29, 2005, Renault appointed Carlos Ghosn as its CEO. So you are now managing two big automakers 6000 miles apart, which seems like an impossible task. He has a house in Paris and Tokyo, between which he travels back and forth. “Is it stretching too much?” asks Christine Tierney, a reporter for The Detroit News.

Some quotes from Carlos Ghosn:

“Management is an art, not a science; especially, it is not an exact science”

“When a company does not have a powerful shared strategy, it becomes uncoordinated, loses its soul and its people are left alone.”

“… unity of command is essential.”

“A CEO also has to be an architect of time. He must choose between long-term management … and the short-term dictates of the markets.”

“The only battles you will surely lose are the ones you don’t fight in.”

“In my opinion, one of the main responsibilities of any CEO is to prepare future leaders to succeed in high-level positions.”

“General Electric is quite an interesting case. GE has produced a lot of leaders, not because the company has always chosen the most talented, but because it has developed them.”

“If an ambitious goal seems really impossible to achieve, then it destroys motivation instead of creating it. People tell each other that it is a lost cause. Conversely, if you set goals that are too conservative, people think they can be done. achieve effortlessly and you destroy motivation that way.

“Even the best organizational ideas are worthless if they are not clearly communicated and supported, with a detailed explanation of why and how”

“Contrary to what some CEOs think, solving the problems of the company does not require that you understand them in every detail, what you have to do is make sure you are surrounded by colleagues who can analyze the issues in depth and summarize them in that way. how you can make, or let someone else make, the most appropriate decisions. “

“… a mismanaged diversification effort is a fatal mistake … you can develop peripheral activities only on the condition that the heart of your business is solid and strong”

A final comment

Even being a ‘gayin’, Ghosn gained celebrity status in Japan; women adore him and he even has an animated character based on him. Carlos Ghosn, the little man from Brazil, achieved superstar status.

We said that a true genius knows his limitations. For both Renault and Nissan, time will show whether it can continue the success of the alliance.

I am inclined to trust Ghosn because he said, “When you have a good time, it’s good to remember the bad times, because that helps keep your feet on the ground.”