Saving the Business Without having to lose the Company
simply by Carlos Ghosn
the call from Louis Schweitzer, CEO of Renault, asking me merely would be willing to go to Tokyo to lead a turnaround at Nissan, the struggling Western motor huge. The two companies had just agreed to an important strategic bijou in which Renault would presume $5. 5 billion of Nissan's personal debt in return for a 36. 6% equity share in the Western company. The combined firm would be the world's fourth largest carmaker. In writing, the deal produced sense to get both sides: Nissan's strength in North America loaded an important gap for Renault, while Renault's cash reduced Nissan's mountain of debt. The capacities of the two companies were complementary: Renault was reputed for innovative design and Nissan for the standard of its architectural. The alliance's success, although, depended on turning Nissan into a profitable and growing organization, which was JANUARY 2002
How can you transform a firm without destroying its personality? As the turnaround at Nissan displays, you have to esteem the dignity ofyour people even as you challenge those to overturn deep-seated traditions.
T WAS AT M A R C H OF 1999 which i got
F My spouse and i R H T S E L S O N вЂў Saving the Business W i t h o u t Dropping the Company
what Schweitzer was calling on myself to do. I guess I was a natural candidate intended for the job, as I had only finished leading to the turn-around initiative in Renault inside the aftermath of its failed merger with Volvo. We had had to make some controversial decisions regarding European grow closures, difficutt for a The french language company with a tradition of state control. I had been in challenging scenarios before then too. In the
Carlos Ghosn, Leader and CEO, Nissan
eighties, as COO of Michelin's Brazilian part, I had to contend with errant inflation rates. In 1991, as the unit CEO of Michelin North America, We faced the task of setting up a merger with Uniroyal Goodrich, the U. T. tire firm, just as industry went into a recession. Yet Nissan was something else totally. It had been struggling to tum a profit intended for eight years. Its margins were notoriously low; specialists estimated that Nissan provided away $1, 000 for each car that sold in the United States due to the lack of brand electric power. Purchasing costs, I was rapidly to discover, had been 15% to 25% bigger at Machine than for Renault. Further more adding to the fee burden was a plant potential far around the company's demands: The Japanese industrial facilities alone can produce nearly a million more cars a year than the firm sold. Carlos Ghosn is the president and CEO of Nissan, headquartered in Tokyo.
And the company's debts, even after the Renault investment, amounted to a lot more than $ii billion (for the convenience of our visitors, the approx . exchange charge at the end of September 2001 of one hundred twenty yen towards the U. H. dollar is employed throughout). This was, quite actually, a do-or-die situation: Either we'd switch the business about or Nissan would cease to exist. It was as well an extremely sensitive situation. In corporate turnarounds, particularly those related to mergers or alliances, success is usually not simply an issue of making critical changes to a company's firm and procedures. You also have to safeguard the company's identity and the self-pride of their people. Those two goals - making changes and safeguarding identity-can easily come into conflict; chasing them both requires a difficult and frequently precarious balancing act. That was especially true in this instance. I was, after all, an outsider - non-Nissan, non-Japanese -- and was initially met with skepticism by the business managers and employees. That i knew that basically tried to determine changes previously mentioned, the effort might backfire, undermining morale and productivity. But since I was as well passive, the corporation would simply continue it is dovmward get out of hand. Today, lower than three years later on, I was pleased to report that the turn-around is succeeding. Nissan can be profitable...