Anda di halaman 1dari 26

The City College of New York

ECO 340 Principles of


Management
Case study on:
Carols Ghosn & Nissan Turnaround
Management Strategy
Page 1 of 26
Prepared by: Toufic Saleh

Page 2 of 26
In Carlos Ghosn We

Trust?!

Life & Carrier

Carlos Ghosn, (born 9 March 1954), is a

French businessman of Lebanese origin. He is the current CEO and President of Renault of

France and Nissan of Japan. He is largely credited with turning around Nissan. As an outsider in

charge of one of Japan's largest companies, Ghosn has been extremely successful. He was voted

Man of the Year 2003 by Fortune magazine's Asian edition and is also on the board of Alcoa,

Sony, and IBM. Ghosn became CEO of Renault, in 2005, succeeding Louis Schweitzer, while

remaining CEO of Nissan as well.

Ghosn (pronounced Gonne in French, Ghosen in Lebanese Arabic) was born in Porto Velho,

Brazil on 9 March 1954 to a French mother and Lebanese father. At age 6, he moved to Beirut,

Lebanon, with his mother. He completed his secondary school studies there, in a Jesuit school

(Collège Notre-Dame de Jamhour). Then he completed his classes’ préparatoires at Lycée

Stanislas in Paris. He graduated with engineering degrees from the École Polytechnique in 1978

with last year's specialization at the École des Mines de Paris. He is a French citizen.

He is married to Rita Ghosn and has four children. Ghosn is multilingual, speaking four

languages fluently (Arabic, Portuguese, French and English).

Page 3 of 26
Career: Michelin Corporation: 1978–1981, employee; 1981–1984, plant manager; 1984–1985,

head of research and development of construction and agricultural tires; 1985–1989, of South

American markets; 1989–1990, President and COO of North American companies; 1990–1996,

Chairman, President, and COO of Michelin North America.

Renault Corporation: 1996–1999, executive vice president;

Nissan Motor Company: 1999–2000, COO; 2000–2001, President; 2001– now, President and

CEO;

Renault Corporation: 2005– now, CEO. (Renault – Nissan Alliance)

Introduction

This paper focuses on the managerial and leadership skills of Mr. Ghosn, CEO of Nissan Motor

Co. Ghosn, who was appointed as COO of Nissan after Renault-Nissan alliance, won praises

from auto industry and economical analysts for the amazing turnaround of the failing major

Japanese auto maker.

As Nissan COO, Ghosn made a revival plan, which included massive layoffs, shutting down

factories and breaking the traditional Japanese business supplier network and focused on

changing the organizational behavior from within. This paper also sheds the light on other

important characteristics of Ghosn's managerial skills.

Page 4 of 26
Gain an insight into the entrepreneurial and leadership qualities of Carlos Ghosn after a review

of his career spanning two and half decades.

Nissan before the Magician

Nissan Decline:

Nissan started showing signs of decline from the early 1990s. Its market share in the US

automobile market declined to 4.7% in 1991 from 5.5% in 1980, while during the same period

other Japanese automakers increased their share in the US market from 17.7% to 28.5%.

In Japan also, Nissan's market share declined from 34% in 1974 to below 19% in the late 1990s.

In 1992 fiscal its pretax profits were $615 million - a 50% decline when compared to its 1991

pretax profits. Many analysts were of the opinion that in the early 1990s, the top management at

Nissan failed to take notice of changing trends in the customer tastes especially in the US, its

biggest export market. Commented David Magee, "Management once hailed as progressive and

trend-setting was now a part of Japan's old boy network, arrogant and oblivious to market

changes and customer needs." According to analysts, over capacity, high production costs, and

unrelated investments were major weaknesses of Nissan during the 1990s.

Page 5 of 26
Nissan took various steps during 1992 - 1998 to turn the company around. However none of

these efforts were successful. The first restructuring plan announced in 1993 aimed at reducing

over capacity but failed to achieve its objectives due to strong opposition from the labor unions

to shutdown plants. Nissan launched another restructuring plan in 1995, when the manufacturing

plant at Zama Island was shut down, but the workers had to be transferred to other

manufacturing plants due to strong resistance from the labor unions. The 1995 restructuring plan

also failed to turn Nissan around. In FY 1998, another restructuring plan - Global Business

Reform Plan - was announced. It aimed at consolidating operating profits of the company,

concentrating on increasing profitability rather than sales. It planned to introduce high profit

margin models, focusing on global markets especially the US market. But even before this plan

could be implemented, Nissan had to borrow $708 million from state-owned Japan Development

Bank to remain operational.

Initially, Nissan had talks with three players - Daimler (Germany), Ford (US) and Renault

(France). Nissan was more interested in either Daimler or Ford picking up a stake in the

company as both these companies was bigger and had more financial muscle than Renault

(which had just re-established itself in 1997). But both Daimler and Ford backed out and Nissan

was left with only one possible partner - Renault

Mr. Fix it

Corporation’s performance makes it a miracle

Since May 28, 1999, date of the closing of their agreement, Renault and Nissan have rapidly

completed a number of vital stages. These relate both to the basis of the Alliance and to the

implementation of synergies between the two groups. Work already done by the Cross Company

Page 6 of 26
Teams confirms the transaction rationale and feasibility of the objective of overall savings of $

3.3 billion (FRF 20 billion / 390 billion yen / 3 billion euros) for the 2000-2002 periods alone. In

the longer term, these synergies would reach $ 3 billion each year from 2005 onwards.

Nissan and Renault managers and engineers have rapidly established a close working

relationship marked by their joint determination to succeed, an open-minded attitude and mutual

respect and trust. The quality of this relationship is a key asset in making a success of the

Alliance. A true complementarity of business experience and technical skills appears as a solid

foundation. Balanced relations between the two companies and the development of strong

identities for each of the brands are the core values on which the cooperation between Renault

and Nissan is being built.

The Annual General Meeting of Nissan shareholders approved Carlos Ghosn's appointment to

the Nissan Board of Directors on June 25, 1999. He immediately assumed his duties as Chief

Operating Officer of Nissan. Patrick Pélata, appointed Executive Vice President in charge of

Product Planning, Design and Strategy, and Thierry Moulonguet, named Deputy Chief Financial

Officer, also joined the Nissan Board.

The Annual General Meeting of Renault shareholders appointed Yoshikazu Hanawa, Chairman,

President and Chief Executive Officer of Nissan Motor, to the Renault Board of Directors on

June 10, 1999. Mr. Hanawa has served on the Renault Board since that date. Further, Tsutomu

Sawada, appointed Senior Vice President, Adviser to the Chairman, joined the Renault

Management Committee (CDR) on September 1, 1999, and Mr Yutaka Suzuki was appointed

Senior Vice President, Alliance Coordination Bureau.

Page 7 of 26
17 Renault people have joined Nissan at management level and one more is expected in the

course of 1999. They have been appointed in the following sectors: office of the COO.,

international human resources, finance and treasury, corporate planning, product planning,

purchasing, manufacturing and engineering, marketing and South American operations. Seven

Nissan people have joined the ranks of Renault's management and 14 others are expected to

follow before the end 1999. They have been appointed in the following sectors: Alliance

Coordination Bureau, quality, project management, marketing and human resources.

Partnership with Renault

• CEO Yoshikazu Hanawa gained an alliance with Renault who took a 36.8% equity stake in

Nissan

• Hanawa negotiated Agreement:

1. Nissan retains its own name

2. Nissan CEO would be selected by Nissan

Board of Directors

3. Nissan would be responsible for its own revival plan

•Hanawa asked for Carlos Ghosn to join Nissan as COO.

Why ask for Carlos Ghosn?

• Lebanese parents, born in Brazil and educated in Paris.

• Spent 18 years with Michelin in Brazil and North America.

• While CEO of Michelin North America, he led the merger with Uniroyal Goodrich.

• Joined Renault 1996 as Executive Vice President, Manufacturing and Purchasing

• Earned the nickname “Le Cost-Killer”

Page 8 of 26
Ghosn’s Challenges…

Can He Lead A Japanese Firm?

• Middle-eastern and Latin Cultural Background

• French Educated and American-French Experience

• Speaks no Japanese

• In a society that suspects foreigners.

• Taking over in Tokyo with the mission to save a losing operation based on a reputation for

cutting costs.

• Everyone hates change. Changing a giant is even more difficult.

Ghosn’s Turnaround strategy

• Nissan revival plan (NRP) or its return to profitability by:

– Development of new cars (ex. 2 passenger Z350 sport car)

– Improvement of Nissan brand image

– Reducing cost (Job cutting, Plants’ closing, cross managerial duties)

When Carlos Ghosn took over as CEO of Nissan Motor Co. three years ago, he had to do some

very un-Japanese things—cut staff, cut suppliers, and introduce accountability into the ranks of

the automaker. You’d think those actions, compounded by his inability to speak Japanese, would

make him unpopular. But instead Ghosn has become somewhat of a hero in Japan for his

turnaround of Nissan that brought the ailing company back to profitability.

Page 9 of 26
It might have been his promise to quit if he didn’t accomplish the task, or his penchant for long

hours, or his commonsense approach to leadership that made him the subject of Japanese

business books and the recipient of many awards. But Ghosn told a Stanford Business School

audience Monday that it all boils down to one word: performance.

“If you want to be a leader, make sure you get results, especially in a situation where it may be

difficult,” he said. “You have to be perceived as a winner.”

Nissan’s numbers bear out the fact that Ghosn has performed. He transformed a $5.5 billion loss

in fiscal 2000 to a $2.7 billion profit the next year—above analysts’ expectations. He trimmed

billions from Nissan’s $20 billion debt and boosted the stock price 30 percent. “We did in two

years what we had planned for three,” he said.

The accomplishments were not without pain, but the carmaker was headed for the junkyard if it

didn’t improve its record of seven years of unprofitability and declining market share. “Nissan

was in a difficult situation not only for the short term but for the future,” Ghosn said.

Just three months after arriving from Renault, where he was executive vice president, he laid out

his revival plan in October 1999. Two years later, he had closed plants in Japan; reduced

headcount by 21,000 employees globally, halved the number of suppliers to around 600, and cut

parts purchasing costs by 20 percent. “We had to speedily and significantly reallocate our

resources to reinvest in resources,” Ghosn said.

Did It Work?

Page 10 of 26
The growth continues under what Ghosn calls his “180 degrees plan”—1 million units sold in

three years, an 8 percent operating margin, and zero debt by 2003. Far from jeopardizing

Nissan’s future, he has invested in a new plant in Canton, Miss. and is expanding the model line,

including reintroducing the Z car.

But that’s “far from the potential—there’s more to come” he told the packed Bishop Auditorium

audience during a student-sponsored View from the Top speech. He sees “at least” cost cuts of 10

to 15 percent “in the foreseeable future.”

Results…

• Nissan Revival Plan achieved one year ahead of plan

– 20% reduction in purchasing costs

– Best financial performance in company’s history

Analysis

3 Success Factors

Success Factors Analysis

• Strategy

– Balance cost cutting and regeneration

• Leadership

– Strong sponsorship with people and cultural skills

• Change management

Page 11 of 26
– Design goals with new incentives (pay per performance)

– Lead from the middle with cross functional teams

Ghosn's Turnaround Strategy

• Cost Reduction

– Changing the suppliers and suppliers’ relationships

– Reduce staff overhead

– Close plants

– Reduce debt

• Build and Empower Cross Functional Teams (CFTs)

• CFT’s role in designing changes

– Middle Managers as Change Agents

– Ghosn as Change Sponsor

• Performance Management

– Changing the Seniority system

– Reinforcement of Key Initiatives

– Pay for Performance

• Leadership Development

– CFT pilots as Next Generation Leaders

– Reinforcing New Nissan Values

– Succession Planning (Criteria for leading a global firm). Must she/he be Japanese?

Ghosn’s Leadership

Page 12 of 26
• Not Japanese, but multicultural experience enabling him to embrace cultural differences and

building on them

• Balanced eastern collectivism and teamwork with western individualism

• Individual personality (Outlook and people- knowledge)

Leading in a Different Culture

Understanding their traditions….

• How their business society is structured

• Decisions center and process

• Power distance

• Communication Style

• Individualistic or collective

• Quality of life

Japanese Management Style

• Keiretsu Japanese System

• Consensus Decision Making

• High Uncertainty Avoidance

• Employment Security

• Government support for industry

• Seniority is the key factor in promotion and recognition processes.

Page 13 of 26
• Position Power

Ghosn’s Change Management Principles

• Establish cross-functional teams (CFT) from middle management to address silos

• Focus on key basic metrics of quality, cost and customer satisfaction. “Execution is 90% of the

job”

• Communications: Connect to all levels of employees all across the company and get everyone

aligned with company goals and strategies

• Transparency: Consistency between what leaders think, say and do. “Walk the Talk”

1. Understand the context, define the barriers & develop a solution

2. Identify and involve power centers and change agents (top, middle, line management)

3. Develop stakeholder commitment & win support

– Communicate/promote objectives

– Create dissatisfaction with old system

– Create incentives/rewards for change

4. Execute change plan

5. Follow progress: monitor, correct and adapt

6. Reinforce learning

7. Celebrate wins and share credit

Page 14 of 26
Getting large numbers of employees to follow the same vision can be a challenge—a challenge
that is magnified when two companies from cultures as different as Japan and France are
partners.

“You can make companies work together even if they are on different continents,”

Ghosn said.

One company does not need to take over the other, nor is it crucial for both companies’ cultures

to meld into one. Preserving distinct styles helps each company’s employees identify with their

employer and stay motivated.

He cited three simple principles that govern the Nissan–Renault alliance.

 The first is respect for identity: “Renault is Renault. Nissan is Nissan. Japan is different

from France,” Ghosn said.

 The second is respect for autonomy: Decisions about Nissan shouldn’t be made in Paris,

and vice versa.

 Finally, Ghosn said, “We don’t work together for the sake of working together.” Every

joint project or decision has to further the companies’ bottom line.

Ghosn also believed in transparency. When he joined Nissan, he publicly announced the

problems that the company faced and the drastic steps required to revive it. He was also open

about Nissan's financial health in all his statements.

Ghosn believed that by giving employees and media the true picture of the company, it would

be easier for him to convince them about the drastic steps that would follow. Another step

Page 15 of 26
that Ghosn took after empowering employees was to improve communication in the

company.

On Global Leadership

“It sometimes seems to me that as Nissan’s identity strengthens, the North Americans, Europeans

and Japanese working here are becoming more alike than they are different”

Carlos Ghosn

In April 2005, Carlos Ghosn, the ‘turnaround artist’ behind the much acclaimed restructuring at

Nissan, would lead two companies. Louis Schweitzer, CEO of Renault, announced in 2002 that

Carlos Ghosn would succeed him as CEO of Renault, while continuing as CEO of Nissan. While

at Nissan, with his cost-cutting ventures and old ‘non-Japanese’ ways of management, he was

regarded as the most charismatic leader in the company as well as among the Japanese business

community. With his unconventional ideas and attention for urgency, he managed to ring radical

changes in the company’s operations. As the industry observers eagerly awaited the management

change, the pressure was perceived to be high on Carlos Ghosn. Brazilian by birth, Ghosn has to

deal with Japanese culture at Nissan as well as French etiquettes at Renault, while achieving

synergies with their partnerships. At the same time, the challenges for the two automakers were

equally high with the global automobile industry in a downturn and product and market

expansions underway at both the companies. In the age of globalization and increasing corporate

scandals, Carlos Ghosn epitomizes the qualities required to be a successful leader with cultural

adaptability and transparency constituting the core of his leadership style.

Page 16 of 26
Exhibit 1

Figures & numbers:

Page 17 of 26
Page 18 of 26
Page 19 of 26
Page 20 of 26
Page 21 of 26
Page 22 of 26
Page 23 of 26
Page 24 of 26
Exhibit 3

References

 Ghosn, C. 2001, “Mr. Ghosn said: ‘thus, I have changed Nissan’ ” Economist September 4 page 86-89

 Ghosn, C. 2002, “Saving the business without losing the company” Harvard business review Jan. pp
37-44

 Nikkei Business, 2000, “The seven diseases Carlos Ghosn defies: Nissan reform” Nikkei BP, Tokyo

 Gold, A., Hirano, M. & Yokoyama, Y. 2001”An outsider take over Japan: An interview

with Carlos Ghosn” The McKinsey quarterly pages 90- 110

 Magee, David, 2003, “Turnaround: How Carlos Ghosn Rescued Nissan” Harper Business; 1 edition

January 7,

 Ghosn, C.,2006, “Shift: Inside Nissan's Historic Revival” Broadway Business, March 21

 Renault Annual reports

 Nissan Annual reports

MANAGEMENT TEAM
GROUP EXECUTIVE COMMITTEE
March 1, 2010

Page 25 of 26
Page 26 of 26

Anda mungkin juga menyukai