Running a business is an art too. To do it pretty well one needs to be a connoisseur of the art while having Gujju/Jewish/ Marwari genes at the same time. Carlos Ghosn is one such man. His talent makes up the history of the survival of Nissan and how Nissan fought back in record time alongwith Renault.
In 1999, Nissan was suffering under a decade of decline and unprofitability, in fact the company was on the verge of bankruptcy, with continuous loses for the past eight years resulting in debts of approx. $22 billion ($32 billion as per some reports). Renault then purchased a 44.3 percent stake in Nissan. While maintaining his roles at Renault, Ghosn joined Nissan as its chief operating officer in June 1999, became its president in June 2000 and was named chief executive officer in June 2001. When he joined the company, it had debt of $22 billion ($32 billion as per some reports) and only three of its 48 models were generating a profit -- and reversing the company's sinking fortunes was considered "mission impossible."
Internal factors: Emphasis on short-term market share growth instead of a long term success strategy; Advanced engineering and technology, plant productivity, quality management. However, less attention was given to design and innovation, on the assumption that consumers were looking for quality and safety. This implies a lack of knowledge of the market, consumer's changing tastes, and showed that Nissan management did not pay too much attention to what competition was doing.
External factors: The devaluation of yen from 100 to 90 yen for a US dollar; Moody's and Standard & Poors's rating agencies announced in 1999 that Nissan would be lowered from investment grade to junk unless it could notget any financial support.
Both Nissan and Renault S.A. of France were eagerly looking for a partner in order to compete in the 21st century. Nissan was rebuffed by both DaimlerChrysler and Ford and Renault was turned away by other Japanese automakers, before the two companies reached an agreement on a global alliance in March 1999. The combination of Nissan and Renault made strategic sense in that the companies' main sales territories and production locales were complementary. In vehicle sales, Nissan was strongest in Japan and other parts of Asia, the United States, Mexico, the Middle East, and South Africa, while Renault concentrated on Europe, Turkey, and South America. The production side followed a similar pattern. On a global basis, the two companies held just more than a nine percent market share, which would position the combination number four in the worldwide auto industry.
As part of the agreement, Renault pumped $5.4 billion into cash-hungry Nissan in exchange for a 37 percent stake in Nissan Motor and a 22.5 percent stake (later raised to 26 percent) in Nissan Diesel Motor Co., a heavy truck unit. Although it did not secure complete control of Nissan, Renault gained veto power over capital expenditures and installed Carlos Ghosn (rhymes with "bone") as Nissan's chief operating officer (he became president as well in 2000). The Brazilian-born Ghosn was an executive vice-president at Renault and had engineered a rapid turnaround there after joining the company in 1996. French newspapers tagged him with the nickname "le cost killer" because of his tenacious approach to cost cutting--his Renault restructuring slashed $3.5 billion in costs over a three-year period.
The capital injection from Renault quickly reduced Nissan's debt load to Y1.4 trillion ($13 billion). Ghosn rapidly began implementing a massive restructuring of Nissan. Non-automotive operations began to be divested, including mobile and car telephone operations and the aerospace division. Nissan's forklift unit was likely to be sold and Nissan Diesel was a candidate for sale as well, given that Nissan Motor had declared that making cars and light trucks was its core business. In early 2000 Nissan sold a stake it held in Fuji Heavy Industries Ltd. As for the automotive operations, Ghosn in October 1999 laid out a tough cost-containment program slated to be completed by 2002.
The program included: a 14 percent workforce reduction--representing 21,000 jobs, primarily in Japan--through attrition, early retirement, and noncore business spinoffs; the closure of five production plants in Japan in 2001 and 2002; the slashing of Y1 trillion ($9.5 billion) in annual costs, including a 20 percent reduction in purchasing costs and a 20 percent cut in overhead, the latter to include the elimination of one-fifth of Japanese Nissan dealers; and a 50 percent reduction in debt, to Y700 billion ($6.5 billion). Ghosn also began tackling the crucial need for a revitalization of Nissan's bland line of vehicles by substantially increasing capital spending, toward a goal of speeding new products to market four times faster than before. Although such a restructuring was by this time routine in the United States and becoming more commonplace in Europe, Ghosn's plan ran counter to many established business practices in Japan. The biggest question was whether Ghosn could implement the plan without resorting to large-scale layoffs in Japan, which would likely face fierce opposition from workers and labor unions and even from leaders of other Japanese firms. Perhaps to underscore the seriousness of his mission and his determination to turn Nissan around, Ghosn also announced that he would resign if Nissan was not profitable by March 2001.
Ghosn's restructuring had Nissan back in the black by the end of its 2000 fiscal year. The successful turnaround also led the two companies to deepen their relationship, as Renault boosted its stake in Nissan past 44 percent, while Nissan took a 15 percent stake in its French partner. Nissan launched a challenge for itself--to expand its vehicles sales by more than one million by the end of 2004. Again, Nissan met its goal, boosting its vehicle sales to 3.6 million by 2005. The company now became one of the world's fastest-growing carmakers, posting a surge in revenues from $50 million at the beginning of the decade to more than $87 million by 2006. Nissan's growth was all the more remarkable given the declining sales in the overall auto market into the mid-decade. The rescue of Nissan--and its more than 186,000 jobs--transformed Ghosn into an icon in Japan, and even inspired a comic book based on his success in saving the automaker.
A key component to Nissan's success, and the success of the Nissan-Renault alliance had been the companies' decision to develop their models based on common engine, transmission, and vehicle platforms. The decision represented significant cost-savings, while also enabled both companies to move ahead of competitors in vehicle design and technology. As part of the shared platform program, the two companies also began developing a network of shared production facilities, starting with a factory in Brazil opened in 2001.
Ghosn promised to resign if the company did not reach profitability by the end of the year, and claimed that Nissan would have no net debt by 2005. He defied Japanese business etiquette, cut 21,000 Nissan jobs (or 14 percent of total workforce), shut the first of five domestic plants, and auctioned off prized assets such asNissan's aerospace unit. His radical would make him a “target of public outrage,” according to the Wall Street Journal. However, in one year, Nissan's net profit climbed to $2.7 billion from a loss of $6.1 billion in the previous year. Nissan's operating profit (EBIT, or earnings before interest and taxes) margin has increased from 1.38% in FY 2000 to 9.25% in FY 2006.
Ghosn—the first non-Japanese person to lead a Japanese automaker- spearheaded major structural changes at Nissan, dramatically altering the corporate culture. Most notably, he ended Nissan's reliance on an interwoven web of parts suppliers with cross-holdings in Nissan—a Japanese operating model called "keiretsu." The dismantling of keiretsu earned Ghosn the nickname "keiretsu killer." He changed the official company language from Japanese to English and included executives from Europe and North America in key global strategy sessions for the first time. For the forcefulness of his initiatives to change the culture at Nissan, Ghosn has been compared with Admiral Matthew Perry (the US Navy commodore who compelled the opening of Japan to the West in 1854) and General Douglas MacArthur (the chief of staff of the US Army who radically changed Japan's political and economic structure during the post-World War II occupation).
In May 2005, Ghosn was named president and chief executive officer of Renault. When he assumed the CEO roles at both Renault and Nissan, Ghosn became the world's first person to run two companies on the Fortune Global 500 simultaneously. The relationship between Nissan and Renault appeared strengthened in 2005, when Louis Schweitzer announced his decision to retire as head of Renault. Schweitzer wanted Ghosn to return to France to take over Renault's top spot. Nonetheless, as Ghosn told Forbes: "It was too early. I told him the only way it would work is if I was CEO of both companies." Renault, which by then had been struggling with its own declining sales agreed, and in April 2005, Ghosn took over as that company's CEO as well. By the end of 2007, Ghosn appeared to be working his restructuring magic at Renault. With combined vehicle sales expected to top 6.4 million by the end of that year, the company launched an effort to open its alliance to a third partner, approaching General Motors (in danger of losing its long-held global leadership position to Toyota) with an offer to join the alliance. While those talks fell through, Nissan-Renault remained interested in bringing a North America partner into the alliance. With Ghosn in command, Nissan had been transformed from a failing midsized Japanese automaker to an industry pacesetter.
http://en.wikipedia.org/wiki/Carlos_Ghosn
http://www.answers.com/topic/nissan-motor-company-ltd
How do two culturally different auto makers come together under the umbrella of a shared vision? Renault and Nissan are building a powerful alliance that optimizes both companies’ strengths and resources. Innovation and technology are critical to their global business transformation.
In 1999, Nissan was suffering under a decade of decline and unprofitability, in fact the company was on the verge of bankruptcy, with continuous loses for the past eight years resulting in debts of approx. $22 billion ($32 billion as per some reports). Renault then purchased a 44.3 percent stake in Nissan. While maintaining his roles at Renault, Ghosn joined Nissan as its chief operating officer in June 1999, became its president in June 2000 and was named chief executive officer in June 2001. When he joined the company, it had debt of $22 billion ($32 billion as per some reports) and only three of its 48 models were generating a profit -- and reversing the company's sinking fortunes was considered "mission impossible."
Internal factors: Emphasis on short-term market share growth instead of a long term success strategy; Advanced engineering and technology, plant productivity, quality management. However, less attention was given to design and innovation, on the assumption that consumers were looking for quality and safety. This implies a lack of knowledge of the market, consumer's changing tastes, and showed that Nissan management did not pay too much attention to what competition was doing.
External factors: The devaluation of yen from 100 to 90 yen for a US dollar; Moody's and Standard & Poors's rating agencies announced in 1999 that Nissan would be lowered from investment grade to junk unless it could notget any financial support.
Both Nissan and Renault S.A. of France were eagerly looking for a partner in order to compete in the 21st century. Nissan was rebuffed by both DaimlerChrysler and Ford and Renault was turned away by other Japanese automakers, before the two companies reached an agreement on a global alliance in March 1999. The combination of Nissan and Renault made strategic sense in that the companies' main sales territories and production locales were complementary. In vehicle sales, Nissan was strongest in Japan and other parts of Asia, the United States, Mexico, the Middle East, and South Africa, while Renault concentrated on Europe, Turkey, and South America. The production side followed a similar pattern. On a global basis, the two companies held just more than a nine percent market share, which would position the combination number four in the worldwide auto industry.
As part of the agreement, Renault pumped $5.4 billion into cash-hungry Nissan in exchange for a 37 percent stake in Nissan Motor and a 22.5 percent stake (later raised to 26 percent) in Nissan Diesel Motor Co., a heavy truck unit. Although it did not secure complete control of Nissan, Renault gained veto power over capital expenditures and installed Carlos Ghosn (rhymes with "bone") as Nissan's chief operating officer (he became president as well in 2000). The Brazilian-born Ghosn was an executive vice-president at Renault and had engineered a rapid turnaround there after joining the company in 1996. French newspapers tagged him with the nickname "le cost killer" because of his tenacious approach to cost cutting--his Renault restructuring slashed $3.5 billion in costs over a three-year period.
The program included: a 14 percent workforce reduction--representing 21,000 jobs, primarily in Japan--through attrition, early retirement, and noncore business spinoffs; the closure of five production plants in Japan in 2001 and 2002; the slashing of Y1 trillion ($9.5 billion) in annual costs, including a 20 percent reduction in purchasing costs and a 20 percent cut in overhead, the latter to include the elimination of one-fifth of Japanese Nissan dealers; and a 50 percent reduction in debt, to Y700 billion ($6.5 billion). Ghosn also began tackling the crucial need for a revitalization of Nissan's bland line of vehicles by substantially increasing capital spending, toward a goal of speeding new products to market four times faster than before. Although such a restructuring was by this time routine in the United States and becoming more commonplace in Europe, Ghosn's plan ran counter to many established business practices in Japan. The biggest question was whether Ghosn could implement the plan without resorting to large-scale layoffs in Japan, which would likely face fierce opposition from workers and labor unions and even from leaders of other Japanese firms. Perhaps to underscore the seriousness of his mission and his determination to turn Nissan around, Ghosn also announced that he would resign if Nissan was not profitable by March 2001.
Ghosn's restructuring had Nissan back in the black by the end of its 2000 fiscal year. The successful turnaround also led the two companies to deepen their relationship, as Renault boosted its stake in Nissan past 44 percent, while Nissan took a 15 percent stake in its French partner. Nissan launched a challenge for itself--to expand its vehicles sales by more than one million by the end of 2004. Again, Nissan met its goal, boosting its vehicle sales to 3.6 million by 2005. The company now became one of the world's fastest-growing carmakers, posting a surge in revenues from $50 million at the beginning of the decade to more than $87 million by 2006. Nissan's growth was all the more remarkable given the declining sales in the overall auto market into the mid-decade. The rescue of Nissan--and its more than 186,000 jobs--transformed Ghosn into an icon in Japan, and even inspired a comic book based on his success in saving the automaker.
A key component to Nissan's success, and the success of the Nissan-Renault alliance had been the companies' decision to develop their models based on common engine, transmission, and vehicle platforms. The decision represented significant cost-savings, while also enabled both companies to move ahead of competitors in vehicle design and technology. As part of the shared platform program, the two companies also began developing a network of shared production facilities, starting with a factory in Brazil opened in 2001.
Ghosn promised to resign if the company did not reach profitability by the end of the year, and claimed that Nissan would have no net debt by 2005. He defied Japanese business etiquette, cut 21,000 Nissan jobs (or 14 percent of total workforce), shut the first of five domestic plants, and auctioned off prized assets such asNissan's aerospace unit. His radical would make him a “target of public outrage,” according to the Wall Street Journal. However, in one year, Nissan's net profit climbed to $2.7 billion from a loss of $6.1 billion in the previous year. Nissan's operating profit (EBIT, or earnings before interest and taxes) margin has increased from 1.38% in FY 2000 to 9.25% in FY 2006.
Ghosn—the first non-Japanese person to lead a Japanese automaker- spearheaded major structural changes at Nissan, dramatically altering the corporate culture. Most notably, he ended Nissan's reliance on an interwoven web of parts suppliers with cross-holdings in Nissan—a Japanese operating model called "keiretsu." The dismantling of keiretsu earned Ghosn the nickname "keiretsu killer." He changed the official company language from Japanese to English and included executives from Europe and North America in key global strategy sessions for the first time. For the forcefulness of his initiatives to change the culture at Nissan, Ghosn has been compared with Admiral Matthew Perry (the US Navy commodore who compelled the opening of Japan to the West in 1854) and General Douglas MacArthur (the chief of staff of the US Army who radically changed Japan's political and economic structure during the post-World War II occupation).
In May 2005, Ghosn was named president and chief executive officer of Renault. When he assumed the CEO roles at both Renault and Nissan, Ghosn became the world's first person to run two companies on the Fortune Global 500 simultaneously. The relationship between Nissan and Renault appeared strengthened in 2005, when Louis Schweitzer announced his decision to retire as head of Renault. Schweitzer wanted Ghosn to return to France to take over Renault's top spot. Nonetheless, as Ghosn told Forbes: "It was too early. I told him the only way it would work is if I was CEO of both companies." Renault, which by then had been struggling with its own declining sales agreed, and in April 2005, Ghosn took over as that company's CEO as well. By the end of 2007, Ghosn appeared to be working his restructuring magic at Renault. With combined vehicle sales expected to top 6.4 million by the end of that year, the company launched an effort to open its alliance to a third partner, approaching General Motors (in danger of losing its long-held global leadership position to Toyota) with an offer to join the alliance. While those talks fell through, Nissan-Renault remained interested in bringing a North America partner into the alliance. With Ghosn in command, Nissan had been transformed from a failing midsized Japanese automaker to an industry pacesetter.
http://en.wikipedia.org/wiki/Carlos_Ghosn
http://www.answers.com/topic/nissan-motor-company-ltd
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