Name: Husam A. M.

Matric: G1422927
The Nissan Motor Co. Revival Plan

Introduction:
Carlos Ghosn, Who is the new Chief Operation Officer of Nissan, took over
the company in late 1999 while it was suffering from bad losses (6.3
billion USD) and it was on the verge of bankruptcy. His methodology to
recover was new for Japanese culture and people accused him that he is
here for destruction when he started downsizing and releasing employees,
years later he put Nissan on the map as second biggest car maker in
japan.
A SWOT analysis for Nissan prior to Ghosn arrival will clarify how bad the
company did:
SWAT Anlaysis:
Strength:
-

Enough resources
Nissan have the good expertise to come up with new competitive

product
Good opportunity in maket.

Weakness:
-

Failure to concentrate on profit making

Company neglect of its customer

It is weak in cross-functional work
Lack of a common long term-plan
Lack of cash needed for investment in aging product line.
Production far from Economies of scale
Poor marketing and selling mechanism

Threat:
-

Tough competition from other car maker

Pressure from shareholders
Lost confidence from customers

Opportunity:
-

Alliance with Renault to recover.

Room of Development in the company.
Ability to reduce cost.

Carlos diagnosed Nissan main problems of the company and came up with
plan:
Revival Plan on the drawing Board:
Ghosn began by setting up Cross-Functional Teams to examine every area
and

function

of

the

company

and

develop

ambitious,

realistic

recommendations for improvement. Ghosn believed that CFTs are a

powerful tool as he used them to tear down the walls between executives
in the company and make them talk to each other, listen to each other
and share knowledge among each other. He proceeded with the formation
of nine cross functional teams:
1- Business development
2- Purchasing

3456789-

Manufacturing and logistics

Research and development
Sales and marketing
General and Administrative Expenses
Finance-Costs
Product Phasing out
Organization

Each team would be headed by two leaders -with rank of executive vice
president- from different department to avoid having a team with an
excessively limited vision of its domain. After that, each team was
provided with a pilot - senior manager whose area of competence was
most directly linked to the teams defined goal; a purchasing manager for
purchasing team and so on. The pilot was the real leader and he was the
one leading the meetings to insure the free flow of ideas between the
team members.
The teams were made of ten members, the pilot and the team lead. The
pilots were chosen by Ghosn directly and they had a high level of
credibility among their subordinates. Team leaders were collaborating with
the pilots to choose the team members, who are middle-level managers-.
After that they will be assigned to one or more goal where they will be
concentrating their effort.
After 3 months of working, these teams found out the following:
1- Nissans brand Image was so poor that they had to sell comparable
products at lower price than their competitors.
2- Nissan had too many suppliers who received too small orders to
make economies of scale work in their favor.

3- Nissans engineers used to impose specifications that did not take

into consideration the current industry standards.
4- Nissans factories were running at 53% capacity only.
5- General expenses were higher than the best companies in the
industry
6- Distribution network lacked the entrepreneurial initiative.
A plan for survival:
The resulting Nissan recovery plan unveiled in 18 th Oct 1999. It was a 3
years plan were Ghosn promised that he will resign if the company does
not meet the following commitments:
1- Return to profitability by FY 2000, from Y684.4B in 1999
2- Operating margins > 4.5% by FY 2002, from 1.4% in 1999
3- Reduce consolidated Debt by < Y 700 B by FY 2002 from Y1.3
trillion in 1999
In order to do this, his plan called for the following:
1- A reduction in purchasing
2- Manufacturing efficiencies to rise from 50% to 75%
3- Closure of plants / platform from 7 plants / 24 platforms to 4 plants /
15 platform
4- Decrease in parts suppliers of 1,145 by 50%
5- Reduce headcounts to 21,000 from 1999 level of 148,000
6- Reduce points of sale (outlets ) from 3,005 to 2,650 and dealerships,
from 98 to 80 by 2002
The performance of the company improved significantly where the results
in two years were:
1- Consolidated Net income for FY2000 was already +Y 331.1B
2- Operating Margins were 4.75% of sales in FY 2000 and 7.9% in FY
2001

3- Net debt reduced by Y953B and Y435B in FY 2000 and 2001

4- Purchasing costs were down to 20% by FY2001
5- Headcount down to 133,800 in FY 2001.
Selling the plan to shareholders and Employees:
Before implementing the plan, Ghosn had to sell the plan to the
shareholders. He worked on establishing lines of communications with this
group in term of persuading them to renew their faith in the company.
Ghosn assured the shareholders that Nissan former glory would be
restored and worked to gain the credibility by good performance and
transparency.
Ghosn assured the employees that Renault did not come to take
over Nissan but restore the company to its old glory. He was able to have
the respect of the employees because he showed them respect. His offer
to resign if he does not meet his plan results was to make the employees
focus on the new target. Ghosn believed that the employees will deliver
the required when they are trained properly and when the have a clear
plan. He believed in listening and learning to all people regardless of their
level at the company. His strategy was based on three principles:
1- Do not assume anything.
2- Work fast
3- Deliver strong results, which would earn the respect of the
employees.
Ghosn believed that the solution of the problem is in the company itself
and in the hands of the people. It was here were he used cross functional
team to overcome internal problems inside the company especially when

he found out about the huge gap in term of communication between

people inside the company. Ghosn was able to release employees in a
place where permanent employment is entrenched tradition by making
everyone realise that we are near complete collapse were there will be no
jobs for anyone. Ghosn did not just give up on the employees he released,
he tried to relocate them and find them other jobs. Those acts even made
them appreciate his genuine acts and had no hard feelings towards him
for downsizing.
Dealing with the suppliers:
Nissan started sell offs shortly after Ghosns arrival. In addition, he asked
its biggest supplier JATCO to go through restructure to return to
profitability and reduce debt. Many saw this as moves that would hurt
Nissan relationship with its suppliers but it was proven wrong as things
went eventually the same way Nissan wanted; Reduced price and
improved profitability for both sides.
Ghosn with Sellers and Dealers:
Ghosn

worked

with

Dealers

and

sellers

for

imbuing

them

with

entrepreneurial spirit. Sales and marketing were Nissan main weakness.

Nissan detribution network was mediocre in comparison to Toyota. Ghosn
compared between both and found that Toyota dealers are independent
and they feel that they are engaged at all stages of selling Toyota
cars.Nissan setuation is the total opposite were selling network is
dominated by subsidiaries of Nissan.

Nissan 180 and value up:

Carlos Ghosn now in his third year of Nissan Revival Plan and he was was
way ahead of schedule in term of meeting his survival targets. The next
plan is Nissan 180 which is a plan for growth with targets marked for April
2005:
1- 1 million additional units worldwide from FY 2004 till FY2005.
2- 8% operating margins.
3- 0 net debt.
The plan was success and Nissan achieved its highest sales since 1990
with 3 Million unit and with projection of 3.6 Million unit by April 2004.
Later on, and a new plan was introduced called Value up plan which will
start April 2005 and has three critical commitments:
1- Annual global sales of 4.2 illion units by end of FY 2007
2- Maintain top level operating profit margins in the industry
3- Maintain return on invested capital at or above 20%.
Steps of recovery:
The way Nissan recovered can be summarized by the following:

Recover financially
Launch of new models
More representative of the new image
Return to investment and hiring
Stabilization and Increase market share

Ghosn Proved his point that in Automotive industry Product comes first
and the result as publishe in 2004, Nissan is 68th on the top 500 company
globally in terms of financial performance.