Carlos Ghosn

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CARLOS GHOSN: A study of Diversity Management in the
Framework of Strategic Alliances
Summary:
The case focuses on the managerial and leadership qualities of C.
G., CEO of Nissan Motor Co. Ghosn who was appointed as COO of
Nissan after Renault-Nissan alliance, won the accolades from both
industry insiders and analysts alike for spectacular turnaround of
the ailing Japanese auto major.
At Nissan Ghosn initiated a revival plan, which included
massive job cuts, closing down of factories and breaking the
traditional Japanese business alliances. He dismantled Keiretsus traditional Japanese supplier network and concentrated on
changing then organisational culture at Nissan.
The case also throws light on some of the other important
aspects of Ghosns managerial abilities.
Objectives:
Gain an insight into entrepreneurial and leadership qualities of
Carlos Ghosn.
Related Topics:
Diversity management
Leadership styles/Qualities
Cultural differences and the big thing
Strategic Alliances
Others are change and innovation.
Accra: No. 126 Ata Junction, North Legon Ext.
1
Cell: 020 821 42 65,
Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC
0208164076, 020 811 23 24
Case is organised in phases:
Phase 1: Nissan b4 the alliance
1999 Carlos G. takes charge at Nissan
ranked 3rd. biggest car manufacturer In Japan
Total work force of 148,000
Total output 2.4 million vehicles per yr.
Remember output is 300,000 less than output in 1996 there

was a fall in output.
Last time Nissan recorded profit was in 1996
Losses of 684 billion yen for total sales of 6,600 billion yen
Total share of world market = 6.6%, which had dropped to

4.9% in 1999.
27 consecutive years of losses on the domestic market ( 34%

-19% from 1996-1999)
Under capacity production (53%)
Massive resignation among management team ( from eminent

failure)
Reality??? $22 billion debt and this called for capital injection
to prevent insolvency.
The way forward??? A strategic partner/alliance.
The role of Japanese traditions

2
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Large conglomerates (Zaibatsus) dismantled and in its place
were small supplier network (Keiretsus)
Check out key features:
1. Employer responsibility towards employees
1. Strong biz relations, btn producers and ssiers which in turn
brought about good turnaround ability in production.
2. Tightly knit social network within the Keiretsus.
3. cross shareholding
(See Nissans stake in 1394 companies: cross fertilisation and

close contact with MITI)
Renault be4 the alliance in 1999:
Had
just
undergone
stringent
restructuring
and
downsizing phase.
Closure of Vilvoord in Belgium leading to 3500job cuts.
Ready to invest in its future
Profit for first time since 1997
Renault had 85% of its revenue from Europe.
Failed talks with Volvo
Dynamic industry (Remember Chrysler + Daimler Benz,

Saab, Daewoo, GM moves and initiatives).
Limited activity geographically
Light yrs away from cultural and mgt practice.

3
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Phase 2: The negotiations btn Renault and Nissan
Remember Renaults abortive talks with Volvo! Had learnt its own
lessons.
Also
Legalistic approach from the French + trustworthy intent from the
Japanese counterpart..???????
Led to CCT
Aim of the CCT
1.
To deal with cultural differences
2.
Deal with synergies btn the 2 comps
3.
Oversee future restructuring of the 2 firms.
The Renault-Nissan Alliance
By March 1999 Nissans challenge were eminent and was

desperate.
failed deal with Daimler
then came in Renault; who did not want to be seen as taking

advantage of the weakness of Nissan
The official alliance agreement was announced in March 27,

1999.
Renault invested 5 billion euros to gain 36.8% stake in Nissan

(option to be increased to 44.4%).
2 I C of Renault Carlos G. for Nissan Executive committee.
Chair of Nissan (Hanawa) for the Renault board

4
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No outright take over; delicately avoided by Renault.
Single joined strategy -------profitable growth and community of

interests
Every effort was made to avoid one partner taking advantage of

the other.
How???? Distinct corporate identity was maintained.
Strengths and weakness of Nissan

Strengths:
International presence in the USA (one of best production

systems in the world)
Know-how/cutting-edge technology
Competent and loyal
NB* Nissans attractive brands in the US and how it failed to

spread the know-how to other parts of the world where they had
operations.
Weakness
Lack of clear profit orientation
Lack of customer focus and too much focus on competitors
Lack of cross functional or cross border collaboration
No sense of agency
No shared vision

5
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Japanese tradition (feeling of foreigner, dwindling confidence,

no collaboration cos of culture.
[Read on vision + mission + Strategies}

[What makes a good mission or vision?]
Restructuring and Developing Nissan

1. the Nissan Revival Plan [NRP]
Strategic alliance completed may 28 1999 with Carlos

as CEO.
Carlos set to work by forming CFTs by July
Nissan revival plan announced in October
NRP central on 3 key pillars:

a/
achieving profit by 2000
b/
achieving an operating profit higher than 4.5%
c/
Halfling net automotive debt by end of 2010
fiscal yr.
(Refer to case for details)
CFTs
[Note born out of NRP]
Purpose?
Examine all processes at Nissan and make appropriate suggestion
to the mgt team in order to restore profitability and secure future
growth.
6
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(Refer to case)
And note how the ff took place and the pay offs..
1.
The purchasing process
2. Exploiting synergies
3. sale of company assets
4. development of new models
5. human resources
6. communication
So what happened to Carlos G, Nissan and Renault.. ?
Pls refer to..
1. Nissan in 2001, 1 yr after NRP
2. Nissan in 2002, 2 yrs after NRP
3. Focus on profitable growth: The Nissan 180 plan
4. Focus on Sustainable Profit Growth
Note the diff in 3 and 4. Any comment.?
Focus on Profitable growth
Follows from the success of NRP
Focused on 4 major pillars
1. growth due to additional sales ww
2. cost reductions- by introducing new vehicles, benchmarking,
reducing competition
3. seek synergies
4. positioning
Objectives
7
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1. 1 million additional units sold ww in fiscal yr 2004.
2. 28 new models to be lunched within 3 yrs
3. enter new mkt segments + geographical zones
4. 8% operating profit
5. 0% automotive debt by fiscal yr 2004
Additionally the plan
Envisaged new capital injections in the Canton ass plt

($550m)
Extend pdn from 25000 to 40000 vehicles
With 1300 additional employees
1.3 m vehicles in N. America
CFTs continued to operate in order to achieve the objectives of the

plan.
Note the introduction of 3-3-3 program to reduce purchasing cost
of Nissan.
1. Ssiers + Engineers + Purchasing people
2. Three regions = Japan/Asia + Americas + Europe/Mid East &
Africa
3. Over a 3 yr period
Pay offs of the N 180 Plan
Increased unit sales (67%)
Increased operational profit (10%)
Net profit 485 billion Yen
Automotive debt eliminated, cash in hand = 68m euros

8
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Nissan alongside greatest of ww car manufacturers
Expanded in Chinese mkt
Nisan dong Feng new comp = D.F Motor Co with wk force

of 74000
Results: cost cutting + more efficient purchasing + consistent

quality improvement
New synergies to be sought with sister comp R
Double badge of 2 LCVs in Europe
Joint purchasing (NRPO) to leverage purchasing power
Joint devpt of engines and transmissions
Joint pdn in Mexico + common platform in Brazil
NB:
Following successful implementation of NRP + numerous

successful projects Renault increased its stake in Nissan from
36.8% to 44.4% (1.85 b euros).
Nissan acquired 13.5% of R by investing 1.9 b euros (with an
option to increase to 15% later).
J RNPO established to provide com ssier base.

(NB the undertaken by the both Boards for each comp to retain its
image + pdt range)
Pay offs of the Reinforced Alliance

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1. Boosted Rs activities in Australia by N: N benefited from
Rs facility in Brazil to gain strong position in the
Mercosur zone
2. Process in 1 facilitated by joint utilisation of technical
components and platforms.
3. Enhanced exchange of best practices
4. RNPO enabled both comps (R & N) to make substantial
economies of scale
5. Shortened delivery time + general quality improvement
due to the streamlined no of ssiers. (NB: Ssiers reward of
bigger volume of biz in the new frame wk).
6.
Joint use of ass. plts proved a valuable assert in

consolidating the companies position on different mkts.
*NB the Renault Nissan IS/IT in 9/2001 which later became RN Info
Services (RNIS) in 7/2002. Purpose was to improve performance
and progress in 3 key areas
1. standardise infrastructures (telecoms + netwks)
2. Global vendor mgt
3. implement common biz applications
Focus on sustainable profit growth

-
Important to remember: R was the only comp ready to run

the risk of forming an alliance with N.

10
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-
Alliance seems to have exceeded all expectations
N is ref in the manuf sector: R is ref in mgt
30 R staff currently in Japan
Complementary ww mkt presence
Both R + N brought skills + resources to bear on the alliance

without losing their corp identity.
Nissans value up commitment running from 4/2005 to

3/2008 hinges on 3 major pillars:
1. Growth a target of 4.2m units
2. Sustained profitability. N to maintain position of the
comp with the highest profit margin in the auto manuf.
mkt.
3. Return on investment return on invested capital in
excess of 20%
How can these be maintained????????......

Thanks to NRP + N180+ Value up strategies (3, 4)
NS mkt capitalisation = 4.3 > it was in 1999.
Ns value higher than R
Consolidated operating margin = 7.7%
Ghosn as global leader in a changing world (refer to

supplementary reading list as well for leadership qualities of Carlos
G.)
Strategies for extraordinary turnaround:
11
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-
Breaking cultural barriers/tradition
Downsizing
Plant closures
Reward for performance ( NB all of these were alien to

Japanese culture)
Cultural diversity
Personal convictions + mgt techs + global leadership styles
Transparency
motivation
result
driven
eff.
Comm./listening +respect
-
Adaptability + commitment + empowerment
N gained financial health but faces challenges just as other car

manuf.
Sustain high profit amidst increasing competitive mkt.

12
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Carlos Ghosn

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Educational Solutions: Smart Educational and Learning solutions that works for you.

A subsidiary of the Noahs Ark Group .

Case is organised in phases:

Phase 1: Nissan b4 the alliance

1999 Carlos G. takes charge at Nissan

ranked 3rd. biggest car manufacturer In Japan

Total work force of 148,000

Total output 2.4 million vehicles per yr.

Remember output is 300,000 less than output in 1996 there

Last time Nissan recorded profit was in 1996

Total share of world market = 6.6%, which had dropped to

27 consecutive years of losses on the domestic market ( 34%

Under capacity production (53%)

Massive resignation among management team ( from eminent

The way forward??? A strategic partner/alliance.

The role of Japanese traditions

Accra: No. 126 Ata Junction, North Legon Ext.

(See Nissans stake in 1394 companies: cross fertilisation and

Closure of Vilvoord in Belgium leading to 3500job cuts.

Ready to invest in its future

Profit for first time since 1997

Renault had 85% of its revenue from Europe.

Failed talks with Volvo

Dynamic industry (Remember Chrysler + Daimler Benz,

Limited activity geographically

Light yrs away from cultural and mgt practice.

Accra: No. 126 Ata Junction, North Legon Ext.

To deal with cultural differences

Deal with synergies btn the 2 comps

Oversee future restructuring of the 2 firms.

The Renault-Nissan Alliance

By March 1999 Nissans challenge were eminent and was

failed deal with Daimler

then came in Renault; who did not want to be seen as taking

The official alliance agreement was announced in March 27,

Renault invested 5 billion euros to gain 36.8% stake in Nissan

2 I C of Renault Carlos G. for Nissan Executive committee.

Chair of Nissan (Hanawa) for the Renault board

Accra: No. 126 Ata Junction, North Legon Ext.

No outright take over; delicately avoided by Renault.

Single joined strategy -------profitable growth and community of

Every effort was made to avoid one partner taking advantage of

How???? Distinct corporate identity was maintained.

Strengths and weakness of Nissan

International presence in the USA (one of best production

Competent and loyal

NB* Nissans attractive brands in the US and how it failed to

Lack of clear profit orientation

Lack of customer focus and too much focus on competitors

Lack of cross functional or cross border collaboration

Accra: No. 126 Ata Junction, North Legon Ext.

Japanese tradition (feeling of foreigner, dwindling confidence,

[Read on vision + mission + Strategies}

Restructuring and Developing Nissan

Strategic alliance completed may 28 1999 with Carlos

Carlos set to work by forming CFTs by July

Nissan revival plan announced in October

NRP central on 3 key pillars:

achieving profit by 2000

achieving an operating profit higher than 4.5%

Halfling net automotive debt by end of 2010

The purchasing process

Envisaged new capital injections in the Canton ass plt