Lessons Learnt From Nissan's Historic Revival

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“SHIFT” LESSONS LEARNT FROM NISSAN’S HISTORIC REVIVAL © DKD 5th JANUARY 2007 Page 1 Carlos Ghosn “Le Cost Killer” Personal Glimpse 1. Excerpts from SHIFT The Historic Revival of Nissan Grandfather, Bichara Ghosn, a Maronite Christian (eastern Catholic) , emigrated from Lebanon to Brazil. He worked hard an eventually owned 3 businesses, agricultural products trading, rubber and air transport operation. He had eight children, 4 boys and 4 girls. Father, Jorge Ghosn took over the air transpo
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   © DKDPage 15 th JANUARY 2007 “SHIFT”LESSONS LEARNTFROMNISSAN’S HISTORICREVIVAL   © DKDPage 25 th JANUARY 2007 Excerpts from  SHIFT The Historic Revival of Nissan  Carlos Ghosn “Le Cost Killer” Personal Glimpse  1. Grandfather, Bichara Ghosn, a Maronite Christian (eastern Catholic) , emigrated from Lebanon to Brazil. He worked hardan eventually owned 3 businesses, agricultural products trading, rubber and air transport operation. He had eightchildren, 4 boys and 4 girls.2. Father, Jorge Ghosn took over the air transport business. Married Rose, who was born in Nigeria and educated with theSisters of Besancon, guardians of the Catholic faith and French culture in Lebanon. They had 2 children, Carlos andClaudine.3. Carlos was educated at the Collège Notre-Dame until high school in Lebanon. In Paris, attended the Lycèe Saint-Louis inpreparation for admission into the Ècole Polytehcnique. Graduated from the Ècole des Mines in 1978.4. Recruited by Michelin to work in Brazil, however he spent the earlier 7 years in Europe. He became the General Managerof Michelin factory in Pyu-en-Velay in 1981 at the age of 27. He left for Michelin Brazil in 1985 with his wife Rita. In 1989he left for Michelin USA as the CEO.5. Joined Renault in October 1996 as executive Vice-President in charge of purchasing, research, engineering anddevelopment after being recruited by Louis Schweitzer.6. Developed the 20 Billion plan aimed at cost reduction of Renault vehicles i.e. a cost reduction of 9,000 to 10,000 francsper car in three years.7. Became the COO of Nissan in 1999. Developed the NRP (based on the 20 Billion Plan). By March 2002, achieved thefollowings: Reduce purchasing costs by 20%, Reduce General Expenses by 20% (inclusive of marketing expenses),Reduce the number of network subsidiaries by 20% and a 50% debt reduction.8. However, he and the Nissan Management and the Board of Directors committed the followings ate the Tokyo MotorShow in 1999: A return to profitability by 2000, achieve profit margin in excess of 4.5% and a 50% reduction in debt by2002.9. Subsequently developed the Nissan 180 and the Nissan 3-3-3 for growth.   © DKDPage 35 th JANUARY 2007 Excerpts from  SHIFT The Historic Revival of Nissan  Carlos Ghosn “Le Cost Killer” Personal Development Insights  1. At Michelin Paris, went though a rigorous 3 months PS – personnel service – training at Michelin where employeesattended a series of lectures whilst at the same time were given real life problems to solve that actually arose in thecompany. After the completion of PS, went through another phase of training related to personal specialty. He chosemanufacturing as he believed that’s where everything happens – you have to know the product, the people who made itand the management and spent 3 months at the shopfloor!2. At Michelin Brazil, “To deal with the debt, the first thing we had to do was to establish a positive cash-flow. Second, wehad to cut necessary investments to the minimum, reduce our inventories, shorten our customers’ terms of payment, andsell any assets that didn’t seem indispensable”.3. At Michelin USA, “I don’t see how one can manage a business without keeping an eye glued to expenses. If you aremanaging a business, you can’t use your imagination when it comes to costs. You have to be precise about your debtsand your expenses”.4. Relationship with Headquarters, “Functional relations are important; nonetheless, the head office had to respect theautonomy of the local operation team. This kind of balance is difficult to achieve. If there’s little autonomy, you can’tcontrol anything, because you don’t know who’s responsible for what. You wind up stripping the whole system ofresponsibility”.ã “Even the best organizational ideas are worth nothing if they aren’t communicated and supported clearly, with athoroughly concrete explanation of why and how”ã “When you take charge of a factory, you have to establish bonds. So the first thing to do is create a team”ã “If you are a supplier, you have to be particularly attentive to your costs and careful in your price negotiations”.ã “You have to sell a product that people are both willing and able to pay”.ã “Lying or covering-up accomplishes nothing. You have to describe things as they are, and you especially have todescribe it clearly, in a way that everyone listening to you can understand”.ã “If an exercise consists solely in demanding more and more from the supplier, without modifying your relationshipwith him, that’s not going to last long”.ã “When you start thinking about leaving, choose your moment carefully. Go out while you are still on top, not whenyou’re no longer in control of events”.ã “You’d always rather be a pastor in a village than a bishop in Rome”.   © DKDPage 45 th JANUARY 2007 Excerpts from  SHIFT The Historic Revival of Nissan  Carlos Ghosn “Le Cost Killer” At Renault  1. An automobile is the object of both reason and emotion. Automobile manufacturers are architects more than anythingelse. They work with people across a vast range of trades and professions. There are multiple challenges, your situationis characterized by permanent uncertainty. At a given time, you may attain that level of mastery, but you can never becertain that it will last. That’s why changes in management are very risky even though they’re often indispensable.2. Difficulty at Renault:1. Organized into completely separate departments, like silos  Implement cross-functionality.2. Employee morale - failure in North America, AMC; failed projected merger with Volvo  Speed in execution,integrated company with strong personality. Maintain good employee relations whilst achieving high productivity atthe same time.3. “Our Cars are too Expensive”  The 20 Billion Plan, cutting costs from 9,000 to 10,000 francs per car for 3 years.4. Communication, particularly bad news  Prepare the ground, put all the facts out in the open.5. Low productivity  Benchmark Nissan Sunderland Plant, UK.6. “Small” size  Search for an alliance.3. “Any alliance, whatever its terms, costs a great deal of effort”. Whether a partner is big or little, a merger offers the sameorders of difficulty.4. Comments on Renault's proposed merger with Nissan:ã Jacques Calvet, former PSA CEO, “In my opinion, the drawbacks, the financial risk, the juxtaposition of twoproduct lines more competitive than complementary, and above all the enormous difficulty of making two teams,culturally light-years away from each other, work together, all seemed to outweigh the potential advantages”.ã Bob Lutz, estimated that carrying out the Nissan operation would be the equivalent of Renault, of putting $5 billionin a containership and sinking it in the middle of the ocean.
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