Carlos ghos1

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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 Ghosn’s 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.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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

Large conglomerates (Zaibatsus) dismantled and in its place

were small supplier network (Keiretsus)Accra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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 Nissan’s 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.

Phase 2: The negotiations btn Renault and Nissan

Remember Renault’s abortive talks with Volvo! Had learnt its own

lessons.Accra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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 Nissan’s 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

No outright take over; delicately avoided by Renault.

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

interests


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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* Nissan’s 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

Japanese tradition (feeling of foreigner, dwindling confidence,

no collaboration ‘cos of culture.

[Read on vision + mission + Strategies}

[What makes a good mission or vision?]Accra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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.

(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 assetsAccra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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

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 Accra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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

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 improvementAccra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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

1. Boosted R’s activities in Australia by N: N benefited from

R’s 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


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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.

- 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.

- Nissan’s value up commitment running from 4/2005 to

3/2008 hinges on 3 major pillars:

1. Growth – a target of 4.2m unitsAccra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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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)

N’S mkt capitalisation = 4.3 > it was in 1999.

N’s 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:

- 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 + empowermentAccra: No. 126 Ata Junction, North Legon Ext.Cell: 020 821 42 65, Cape Coast: NAC/SoB Prof. Dev. Centre, B 204, Kwame Nkrumah Hall UCC0208164076, 020 811 23 24

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N gained financial health but faces challenges just as other car

manuf.

Sustain high profit amidst increasing competitive mkt.


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