The Gaijin Who Saved Nissan

SHIFT Inside Nissan's Historic Revival

By Carlos Ghosn and Philippe Ris Currency/Doubleday; 232pp; $25.95
(Readers' Reviews below) Editor's Review

The Good An instructive account of Nissan The Bad The authors have little to say about any current problems at the carmaker. The Bottom Line Loads of tips for execs who must operate in the new, globalized world.

It was a union born of desperation. Back in 1999, Nissan was in a death spiral. The company was carrying massive debts, heavy losses, and a badly damaged brand. Renault was a middling European auto maker with a far-frominspiring future. So when Renault CEO Louis Schweitzer ponied up $5 billion to buy effective control of Nissan (NSANY ) that year, there was skepticism, to say the least. Industry wags such as Robert Lutz, currently vicechairman of General Motors Corp. (GM ), publicly stated that Renault might as well have dumped the billions in the Pacific Ocean. Into the breach came Carlos Ghosn, a savage cost-cutter and first-class intellect. But even he gave this salvage job only a 50-50 chance.

Well, today, Nissan is back, no doubt about it. Under Ghosn, now CEO, the company has found its killer instinct. It's turning out great cars and achieving the highest profit margins in the business -- even slightly ahead of Toyota Motor Corp. (TM ) Just how Ghosn managed this is instructively chronicled in Shift: Inside Nissan's Historic Revival, jointly written by Ghosn and French journalist Philippe Ris. Mercifully short on managerial bromides, the compact book offers a trove of practical advice to executives who could find themselves in unfamiliar business cultures with different rules of engagement -- and not much time to sort things out. On the negative side, the authors have little to say about current failings at Nissan, and Ghosn at times seems out of touch -- witness his skepticism on the commercial viability of hybrid cars.

Ghosn's multicultural background made him unusually well-suited to take on the Nissan challenge. He was born in Brazil to Lebanese immigrants. As a child he moved to Lebanon and then on to France, where he earned engineering degrees from the prestigious Ecole Polytechnique and Ecole des Mines de Paris. Along the way he picked up five languages, a love of logic and numerical precision, and an ability to feel his way through unfamiliar cultural terrain. His first stop after graduate studies was Michelin. There, he quickly moved up the ranks -- from plant manager to chief operating officer. And when Schweitzer needed to hire a No. 2 to shake Renault out of its stupor in the mid1990s, Ghosn was an ideal choice. He soon caused an uproar by shuttering a Renault plant in Belgium and wringing out billions in costs by leaning on suppliers and in-house units alike. Fixing Nissan, however, made that stuff look easy. Ghosn determined that he had to slash purchasing costs by 20%, reduce capacity by 30%, close five plants, and displace 20,000-odd workers through layoffs and attrition. An American CEO could do much of that in months. Not so in Japan. In the late 1990s, its public viewed the sale of national champions to foreigners as something akin to treason. Nissan belonged to a massive keiretsu -- a web of business alliances -- in which stability trumped sound financial management. It had billions of yen tied up in crossshareholdings with suppliers and keiretsu partners. When Ghosn announced plans to trim the number of Nissan's steel suppliers from five to three, Yoichi Shimogaichi, CEO of NKK Steel, protested that "Toyota would never act in such a way." (NKK, now part of JFE Steel Corp., survived the cut but saw its Nissan business slashed by half.) Perhaps Ghosn's biggest test was overcoming the deep denial inside Nissan about the company's perilous condition. In Japan, such large companies were viewed as simply too big to fail. If the keiretsu-linked banks didn't rush to the rescue, most execs figured, then the government would. In reality, though, a decade of economic stagnation had frayed such insider ties severely. Ghosn first had to determine just how deep the financial rot ran. He then set up cross-functional Renault and Nissan management teams in engineering, design, and sales. These were told to uncover every problem and set new, realistic-but-tough performance goals. And Ghosn made it clear he would tolerate no backsliding: "If you disagree with the plan," he writes, "you've got to leave the company." As cost savings and debt reduction freed up cash, Ghosn took daring steps to rejuvenate the Nissan brand. He revived the Z-series sports-coupe line with the Nissan 350Z, a model discontinued in 1996. In the U.S., Nissan leaped into new markets with the Murano SUV and the Quest minivan. Nissan also prospered from high-profit, fullsize vehicles such as the Titan truck, Armada SUV, and Infiniti QX56. As Nissan took off, so did the cult of Ghosn inside Japan. The adulation aided the turnaround, but at the end of the day, he admits, it will be the cars that matter. Ghosn also counts himself lucky for arriving in a Japan so fed up with its post-bubble malaise that it was open to change, even from a gaijin. But whether it was luck or talent, Ghosn's efforts have had an impact in Japan that goes beyond Nissan. That is why Shift is worth reading -- and Ghosn is worth watching in years ahead.