By Bert Wyatt
Renault’s Carlos Ghosn has experienced the whole gamut of public emotion since stepping in to rescue Nissan in 1999. Vilified 18 months ago at the shareholders’ meeting by one self-described “patriotic” shareholder, Mr Takashi Watanabe, for not bowing as he entered the room, accused of being an “occupying force”, and personally described as the “destroyer”, today he is venerated by the very same Japanese public.
Ghosn’s austere remedy for Nissan’s ills projected him right into the public eye. In Japan today he is a celebrity.
Back in the Spring of 1999, when Renault chairman Louis Schweitzer paid $5 billion for 36.8% of Nissan, the Japanese carmaker was on the ropes. In a few short years its home market penetration had dropped from 34% to 17%. Profitless for the past eight years, morale was at a low with suppliers, employees and dealers – what has been called a “near-death experience”. As Schweitzer confessed at the time, “I bet the farm on it”. Far from the farm being in danger of repossession, the crops have been plentiful and the harvest is now coming in.
|Nissan’s new Z-type concept, revealed at the Detroit auto show earlier this year|
The name of Brazilian-born Carlos Ghosn (hard ‘G’ rhyming with ‘loan’) meant nothing to the automobile world when he was snatched from relative obscurity in Renault to be given the seemingly impossible task of resuscitating Nissan. Japan obviously expected him to carry out his surgery in the time-honoured, courtly method – “utmost efforts”, “long uphill struggle”, “good basis for recovery”, etc. – such were the phrases that sprung to mind.
In the event, to the astonishment of the Japanese, at that fateful shareholders’ meeting of October 18 1999 Ghosn proceeded to spell out a startling plan for recovery, one that particularly bore down on the home country. Five plants would be closed with the total loss of 21,000 jobs, including 16,000 in Japan, stakes in all but four of the present cosy kereitsu of 1,394 suppliers would be sold, 22 new models would be introduced within three years, ten of which would be in the US market.
“The name of Brazilian-born Carlos Ghosn meant
nothing to the automobile world when he was
snatched from relative obscurity in Renault to
be given the seemingly impossible task of
The challenging phrase he chose was “Nissan is in bad shape”. Japan was dumb-founded. There was an immediate culture clash. In response to the offended Mr Watanabe, who vowed never again to buy Nissan, Ghosn confined himself to apologising for not observing the Japanese rituals, but at the same time met his accuser with light humour, professing to prefer the description of “7 to 11” (reflecting the hours he was working), rather than the “destroyer”, and promising an early return to dividends.
What also became crystal clear was Ghosn’s intention not just to wield the knife, but to stay on and see his programme through. Not for him the surgery and a quick dash for the exit door. He laid down three aims of the Nissan Recovery Plan – a return to profits by year-end March 2001, an operating profit of 4.5% by March 2003, and the $22 billion debt also cut in half by that date.
As if that extensive programme were not enough, he also planned for a 50% reduction in the number of suppliers, an overall cut of 20% in purchasing costs, and the globalisation of purchasing contracts (Japan’s pain, America’s gain). Today, the company is re-energised and refocused in a way that would have seemed impossible even a few months ago. Neither has he retreated one iota from those goals. The trading profit up to March of this year was $2.3 billion, compared with a net loss last year of $6.46 billion. An astonishing turnaround.
Despite continuing weak sales in Japan and the endemic currency problems, he focused on expansion plans, primarily in America. He now has the luxury of being able to fund $1 billion for a new full-size truck assembly plant in the United States, and a similar sum for both a triple expansion of the engine plant in Alabama and increased capacity at the vehicle assembly plant in Tennessee. In all, the company’s capital spending formula is to be 5% of sales, up from 3.5%.
Renault has taken Nissan beyond the convalescent stage – Nissan is on a roll and it has now become the company to watch. Largely on the back of the popular Xterra, US sales last year were up 11%, pushing Pontiac out of sixth place in the volume league. Cross-border mergers are fraught with difficulty, as DaimlerChrysler’s Juergen Schrempp will testify. The Renault/Nissan partnership is a textbook example of how to combine two companies from differing cultures. In fact, Schrempp paid Ghosn the compliment of referring to him as the “Ice-breaker”, suggesting that his achievement with Nissan in the face of cultural hurdles has made DaimlerChrysler’s task with Mitsubishi that much easier.
|Carlos Ghosn… reviled and now revered|
In the United States, Nissan flexes its muscles. Dealers are being asked to go solus, evidence of the influence of Renault. Nissan’s luxury brand Infinity has always insisted on stand-alone franchises, and now pressure is being put on the popular brand to conform. The “fixed-wall” clause (competing manufacturers on the same site but physically separated) is no longer to be acceptable.
Although the demand is couched in soothing terms, there can be no misunderstanding about the importance attached to the change. “It is critical that you have exclusive, dedicated Nissan facilities, operations and management,” says Nissan (US) general manager William Kirrance. The exciting future that Nissan offers makes it certain that dealers will take this ‘invitation’ very seriously.
One other thing is certain – the United States will be a beneficiary of the new thinking at Nissan. The swingeing cuts in the homeland were only a precursor to an expansion theme in America. Nissan’s first full-sized pickup is to be made at the new plant in Mississippi; the high-volume Maxima is to commence production at the existing plant at Smyrna, Georgia; and Nissan is to take over production of the popular Quest from the now-defunct Ford joint venture. All this serves to highlight the importance of the US market, along with Nissan’s determination to supply North America with locally manufactured product as far as practicable.
Perhaps symbolic of all these plans is the decision to bring back the legendary ‘Z’ sports car. This was the car that typified Nissan’s successful image of the eighties. Once again, America plays a major part – California-based Nissan Design International is confident of producing the design for a model that will see production around mid-2002. Leading the project is chief designer Diane Allen, who promises a bolder car with more “aggression and beauty…we know it will be controversial, but I’d rather take risks and do a car that we believe in”. This will not be a “polite car”, she says, whetting the appetite of those aficionados who recall the 240Z with such nostalgia. If the car can come in at under $30,000, as promised, there will certainly be no shortage of buyers.
As Louis Schweitzer admitted, the Nissan acquisition was a tremendous risk for Renault. He was fortunate enough not only to have the man for the moment, but to recognise that man’s ability. Perhaps even Mr Watanabe will be convinced once more to “buy Nissan”.
To view related research reports, please follow the links below:-