Carlos Ghosn: Leading for Global Success at Renault-Nissan

Nissan Motor Co. (www.nissan-global.com), based in Tokyo, is Japans number-two automobile manufacturer. Sales in 2009 were nearly $90 billion, and management is planning to launch forty-eight new car models. A few years ago, Nissan, with 160,000 employees, was on the verge of bankruptcy. The French automaker Renault stepped in, took a 44 percent stake, and installed Carlos Ghosn as

Nissans CEO. In a dramatic turnaround, Ghosn (hard G, rhymes with stone) returned Nissan to profitability and became a celebrity in Japan. Born in Brazil, raised in Lebanon, and educated in France, he is a charismatic leader who speaks four languages. Smooth in public, he works constantly and is committed to organizational goals. He is featured in Japanese comic books, mobbed

for autographs during factory tours, and idolized for saving one of the worlds premier car companies.

Ghosn closed inefficient factories, reduced Nissans workforce, curbed purchasing costs, shared operations with Renault, and introduced new products. Under his watchful eye, Nissan evolved from a troubled carmaker to a corporate success story in just a few years. How did Ghosn do it?

Nissans Organizational Culture

One of Ghosns biggest tests was overcoming the denial inside Nissan about the firms perilous condition. Ghosn cut through antiquated thinking, defying Japans often bureaucratic and clubby business culture by, for example, reducing Nissans steel suppliers from five to three. The CEO of NKK Steel protested that Toyota would never act in such a way.

Corporate Japan often moves slowly and reactively. Ghosn introduced a proactive style, with fast decision making and a culture of anticipating problems and elim- inating them before they happen. Senior management at Nissan now operates with a sense of urgency, even when the firm is not in crisis. Ghosn is always in a rush, relying on decisiveness and delegationbut yielding to consen- sus when it is passionate. He dislikes long meetings. In- stead of squandering time analyzing and discussing, he prefers action. At Nissan, he pushes staff to meet tough sales targets and once publicly promised the manage- ment team would resign if it didnt meet them. He in- spires the workforce, regularly visiting them on the factory floor. Even the most mundane events are handled like big media shows. One Nissan earnings news confer- ence opened with loud music and dazzling video shots of zooming cars.

Ghosns Global Orientation

In the style of a true globalist, Ghosn states, Its irrele- vant where you are headquartered . . . the keys are where the jobs are located and where the profits go. To rein- force his global aspirations, Ghosn made English, not Japanese, the official language of Nissan. Managers who learn English advance faster than those who speak only Japanese. The move proclaimed Ghosns intention to re- organize Nissan as a global firm.

Ghosn took over as CEO of Renault in 2005. He now runs both companies, commuting between Paris and Tokyo in his Gulfstream jet. The unusual arrangement un- derscores the demand for proven leaders in the global auto industry, which suffers from oversupply and intense competition. In a typical month, Ghosn might spend the first week in Paris, focusing solely on Renault, and the third week in Japan, focusing on Nissan. He carries two agendas: one for Nissan and one for Renault. He person- ally oversees Nissans North American business, where half of Nissans profits are earned.

The Role of Innovation

Nissan constantly invests in R&D for breakthrough tech- nologies and innovative products. Roughly 5 percent of net sales are reinvested in new technologies. At its new Mississippi plant in the United States, Nissan launched four models in less than eight months, rolling out a small car (the Versa), a re-engineered Altima midsize sedan, a heavily redesigned Nissan Quest minivan, and a re- designed Infiniti G35. It established a design subsidiary in Shanghai, China, to produce cars that fit that countrys growing market.

In green technology, Nissan is stressing all-electric vehicles. In 2009, Ghosn unveiled the Nissan LEAF, the worlds first affordable, zero-emission car, based on lithium-ion battery technology. The LEAF is a medium- size hatchback with a range of more than 160 km (100 miles). In 2010, it was launched in Japan, Europe, and the United States.

Global Production

Renault-Nissan has factories in Britain, France, and the United States, to be close to key markets. It also manu- factures in China, Taiwan, and the Philippines to leverage low-cost, high-quality labor. Nissan uses modular archi- tecture: Suppliers manufacture single modules, which are then bolted into a car or truck body rolling down the as- sembly line. The modular approach minimizes the total cost of manufacturing cars.

Nissan consolidated its U.S. manufacturing opera- tions, moving thousands of jobs from southern California to its new plant in Tennessee. The move centralized man- ufacturing and made it easier for senior management to keep tabs on U.S. operations. The Tennessee plant is Nis- sans most productive factory in North America, produc- ing a car in under 16 labor hours, several hours fewer than rival carmakers.

Additional Global Strategy Elements

The integration of Nissan with Renault has gone smoothly. Renault-Nissans board of directors consists of four members from each organization. The combined firm is globalizing engineering, production, and purchasing operations. Management established a joint design center in AmsterdamRenault-Nissan BVthat provides a neutral forum to map out common strategy for product develop- ment and engineering. A $45 million engineering center near Tokyo consolidates global production and engineering.

Renault-Nissan minimizes the number of platforms (chassis) used in manufacturing. Every shared platform saves $500 million annually for each carmaker. Renault shares eight engine designs with Nissan. Roughly three- quarters of the parts used by the two automakers are sourced jointly, generating economies of scale. Common parts, such as door handles, windshield wipers, and seat

belts, are shared among different models. Such moves have allowed both firms to slash purchasing costs and shave months off the development time of new vehicles. One result is the worlds most global car, called the Nissan Versa in the United States, the Renault Clio in Europe, the Nissan Tiida in Asia, and the Renault Logan in the Middle East. In total, Nissan offers seven different vehicles based on the underpinnings that go into the Versa, creating scale economies that improve profits.

Nissan has a presence in the most important markets worldwide. While the United States is a relatively expen- sive place to make cars, it is also the worlds biggest mar- ket. Thus, Nissan has a major manufacturing and marketing presence there. It now exports its U.S.-made Quest minivans to China, considered the next big market. It exports other U.S.-made modelsthe Altima sedan and Infiniti QX56 SUVto the Middle East and Latin America

Emerging Markets: The Next Big Target

In the coming decade, millions of consumers in Brazil, China, India, and other emerging markets will join the mid- dle class. Many dream of owning a car. Estimates indicate the market for automobiles priced under $10,000 will soon grow to roughly 20 million cars. Indias car market will dou- ble to 3.3 million cars by 2014, and Chinas demand will grow 140 percent, to 16.5 million cars in the same period. In 2009, Indias Tata Motors launched a new car, the Nano, priced at around $2,500. The Chinese have launched a sim- ilar car. Automakers in China and India leverage low wages in their countries to squeeze down manufacturing costs.

Ghosn is making emerging markets a cornerstone of Nissans global strategy. Renault-Nissan launched the

Logan, built in Romania, with a base price around $7,500. The company is building a low-cost pickup truck based on the Logan for sale in Southeast Asia, South Africa, and the Middle East. Demand is high because of the high quality and low price. Nissan-Renault teamed with Indias Bajaj Motors to build a $2,500 car to compete with Tatas Nano. The ULC (for ultra low-cost) was launched in In- dia and is being targeted to other emerging markets as well.

Renault acquired full control of Samsung Motors, making South Korea an important base for Renault- Nissan. Nissan launched a midsize sedan in China. The Bluebird sedan is produced in a 50-50 joint venture with a local Chinese firm. The Nissan Tsuru subcompact is the top-selling car in Mexico, accounting for 20 percent of new-car sales. It is increasing its presence in other emerg- ing markets, such as Russia and India.

Global Recession

Like other automakers, Nissan hit a downturn in 2009, leading the firm to post its first loss in a decade. The firm attributed the loss to the global financial crisis, the neg- ative impact of a strong yen, and the loss of consumer confidence around the world. In response, Ghosn moved quickly to cut production at several plants in Japan and Europe, especially those that make vehicles for advanced economies. Nissan also reduced its worldwide workforce by some 20,000 employees. Nissan is increasing its pres- ence in China, Russia, and India, and further shifting en- gineering, production, and purchasing to low-cost countries. The firm will source more parts and compo- nents outside Japan, in emerging markets.

Case Questions

1. In what ways is Carlos Ghosn a visionary leader? What traits does he possess that are typical of a vi- sionary leader?

2. What is the nature of Nissans international strategy? Is the firms strategy primarily multidomestic or global? Justify your answer. What advantages does Nissan derive from the particular strategy(s) that it pursues? In what ways does Nissan demonstrate ef- ficiency, flexibility, and learning?

3. Describe Nissans organizational culture. What are the characteristics of Nissans culture? In what ways has Car- los Ghosn contributed to Nissans culture? Elaborate.

4. Global firms pursue a relatively centralized approach to international operations. What are the character- istics of the trend toward global integration of com- pany operations? How does Nissan demonstrate these characteristics?

5. 5. Examine Nissan in terms of the integration- responsiveness framework. What are the pressures that Nissan faces for local responsiveness? What are the pressures that Nissan faces for global integra- tion? What advantages do local responsiveness and global integration each bring to Nissan?