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FIRST PERSON

Saving theBusinessWithout

Losing theCompany

by Carlos Ghosn

IT WAS IN M A R C H OF 1999 that I got

the call from Louis Schweitzer, CEOof Renault, asking me if I would be will-ing to go to Tokyo to lead a turnaroundat Nissan, the struggling Japanese mo-tor giant. The two companies had justagreed to a major strategic alliance inwhich Renault would assume $5.4 bil-lion of Nissan's debt in return for a36.6% equity stake in the Japanese com-pany. The combined company would bethe world's fourth largest carmaker. Onpaper, the deal made sense for bothsides: Nissan's strength in North Amer-ica filled an important gap for Renault,while Renault's cash reduced Nissan'smountain of debt. The capabilities of thetwo companies were also complemen-tary: Renault was known for innovativedesign and Nissan for the quality of itsengineering.

The alliance's success, though, de-pended on turning Nissan into a prof-itable and growing business, which was

How do you transform

a company without

destroying its identity?

As the turnaround at

Nissan shows, you have

to respect the dignity

of your people even as

you challenge them to

overturn deep-seated

traditions.

JANUARY 2002 37

FIRST PERSON • Saving the Business Without Losing the Company

what Schweitzer was calling on me todo. I suppose I was a natural candidatefor the job, as I had just finished con-tributing to the turnaround initiative atRenault in the aftermath of its failedmerger with Volvo. We had had to makesome controversial decisions aboutEuropean plant closures, difficutt for aFrench company with a tradition ofstate control. I had been in challengingsituations before then as well. In the

Carlos Ghosn, President and CEO, Nissan

1980s, as COO of Michelin's Braziliansubsidiary, I had to contend with run-away inflation rates. In 1991, as the unitCEO of Michelin North America, I facedthe task of putting together a mergerwith Uniroyal Goodrich, the U.S. tirecompany, just as the market went intoa recession.

But Nissan was something else en-tirely. It had been struggling to tum aprofit for eight years. Its margins werenotoriously low; specialists estimatedthat Nissan gave away $1,000 for everycar it sold in the United States due to thelack of brand power. Purchasing costs,I was soon to discover, were 15% to 25%higher at Nissan than at Renault. Fur-ther adding to the cost burden was aplant capacity far in excess of the com-pany's needs: The Japanese factoriesalone could produce almost a millionmore cars a year than the company sold.

Carlos Ghosn is the president and CEO ofNissan, headquartered in Tokyo.

And the company's debts, even afterthe Renault investment, amounted tomore than $ii billion (for the conve-nience of our readers, the approximateexchange rate at the end of September2001 of 120 yen to the U.S. dollar is usedthroughout). This was, quite literally,a do-or-die situation: Either we'd turnthe business around or Nissan wouldcease to exist.

It was also an extremely delicate situ-ation. In corporate turnarounds, particu-larly those related to mergers or alliances,success is not simply a matter of makingfundamental changes to a company'sorganization and operations. You alsohave to protect the company's identityand the self-esteem of its people. Thosetwo goals - making changes and safe-guarding identity-can easily come intoconflict; pursuing them both entails adifficult and sometimes precarious bal-ancing act. That was particularly truein this case. I was, after all, an out-sider - non-Nissan, non-Japanese - andwas initially met with skepticism bythe company's managers and employ-ees. I knew that if I tried to dictatechanges from above, the effort wouldbackfire, undermining morale and pro-ductivity. But if I was too passive, thecompany would simply continue itsdovmward spiral.

Today, less than three years later, I ampleased to report that the turnaround issucceeding. Nissan is profitable again,and its identity as a company has grownstronger. How did we manage it? In twokey ways. First, rather than impose aplan for the company's revival, I mobi-lized Nissan's own managers, througha set of cross-functional teams, to iden-tify and spearhead the radical changesthat had to be made. Second, Renault re-mained sensitive to Nissan's culture atall times, allowing the company room todevelop a new corporate culture thatbuilt on the best elements of Japan's na-tional culture. In the following pages,I'll discuss the turnaround process andNissan's new culture in more detail. Butto really understand the Nissan story,you first have to understand how dra-matically the company has broken withits past.

Breaking with Tradition

when I arrived at Nissan at the closeof the 1990S, established business prac-tices were wreaking huge damage onthe company. Nissan was strapped forcash, which prevented it from makingbadly needed investments in its agingproduct line. Its Japanese and Europeanentry-level car, the March (or the Micrain Europe), for example, was nearly nineyears old. The competition, by contrast,debuted new products every five years;Toyota's entry-level car at the time wasless than two years old. The March hadhad a few face-lifts over the years, butessentially we were competing for 25%of the Japanese market and a similarchunk of the European market with anold-some would say out-of-date-prod-uct. Similar problems plagued the restof our car lines.

The reason Nissan had cut back onproduct development was quite simple:to save money. Faced with persistent op-erating losses and a growing debt bur-den, the company was in a permanentcash crunch. But it didn't have to be thatway. Nissan actually had plenty of capi-tal-the problem was it was locked upin noncore financial and real-estate in-vestments, particularly in keiretsu part-nerships. The keiretsu system is one ofthe enduring features of the Japanesebusiness landscape. Under the system,manufacturing companies maintain eq-uity stakes in partner companies. This,it's believed, promotes loyalty and co-operation. When the company is large,the portfolio can run to billions of dol-lars. When I arrived at Nissan, 1 foundthat the company had more than $4 bil-lion invested in hundreds of differentcompanies.

The problem was that the majority ofthese shareholdings were far too smallfor Nissan to have any managerial lever-age on the companies, even though thesums involved were often quite large.For instance, one of Nissan's invest-ments was a $216 million stake in FujiHeavy Industries, a company tbat, as themanufacturer of Subaru cars and trucks,competes with Nissan. What sense did itmake for Nissan to tie up such a large

38 HARVARD BUSINESS REVIEW

Saving the Business without Losing the Company • FIRST PERSON

sum of money in just 4% of a competitorwhen it could not afford to update itsown products?

That was why, soon after I arrived, westarted dismantling our keiretsu invest-ments. Despite widespread fears thatthe sell-offs would damage our rela-tionships with suppliers, those relation-ships are stronger than ever. It turns outthat our partners make a clear distinc-tion between Nissan as customer andNissan as shareholder. They don't carewhat we do with the shares as long aswe're stii! a customer, in fact, they seemto have benefited from our divestments.They have not only delivered the pricereductions that Nissan has demandedbut also have improved their profitabil-ity. Indeed, all Nissan's suppliers postedincreased profits in 2000. Althoughbreaking up the Nissan keiretsu seemeda radical move at the time, many otherJapanese companies are now followingour lead.

Nissan's problems weren't just fi-nancial, however. Far from it. Our most

fundamental challenge was cultural.Like other Japanese companies, Nissanpaid and promoted its employees basedon their tenure and age. The longer em-ployees stuck around, the more powerand money they received, regardlessof their actual performance. Inevitably,that practice bred a certain degree ofcomplacency, which undermined Nis-san's competitiveness. What car buyerswant, after all, is performance, perfor-mance, performance. They want well-designed, high-quality products at at-tractive prices, delivered on time. Theydon't care how the company does thator who in the company does it. It's onlylogical, then, to build a company's re-ward and incentive systems around per-formance, irrespective of age, gender, ornationality.

So we decided to ditch the seniorityrule. Of course, that didn't mean wesystematically started selecting theyoungest candidates for promotion. Infact, the senior vice presidents that I'venominated over the past two years all

have had long records of service, thoughthey were usually not the most seniorcandidates. We looked at people's per-formance records, and if the highestperformer was also the most senior, fine.But if the second or third or even thefifth most senior had the best trackrecord, we did not hesitate to pass overthose with longer service. As expectedwhen changing long-standing practices,we've had some problems. When younominate a younger person to a job inJapan, for example, he sometimes suf-fers for being younger- in some cases,older people may not be willing to co-operate with him as fully as they might.Of course, it's alsti true that an experi-ence like that can be a got>d test of thequality of leadership a manager bringsto the job.

We also revamped our compensa-tion system to put the focus on perfor-mance. In the traditional Japanese com-pensation system, managers receive noshare options, and hardly any incen-tives are built into the manager's pay

JANUARY 2002 39


packet. If a company's average pay raiseis, say, 4%, then good performers canexpect a 5% or 6% raise, and poor per-formers get 2% or 2.5%. The system ex-tends to the upper reaches of manage-ment, wbich means that the peoplewhose decisions have the greatest im-pact on the company have little incen-tive to get them right. We changed allthat. High performers today can ex-pect cash incentives that amount tomore than a third of their annual paypackages, on top of which employeesreceive company stock options. Here,too, other Japanese companies are mak-ing similar changes.

Another deep-seated cultural prob-lem we had to address was the orga-nization's inability to accept responsi-bility. We had a culture of blame. If thecompany did potirly, it was always some-one else's fault. Sales blamed productplanning, product planning blamed en-gineering, and engineering blamed fi-nance. Tokyo blamed Europe, and Eu-rope blamed Tokyo. One of the rootcauses of this problem was the fact thatmanagers usually did not have well-defined areas of responsibility.

Indeed, a whole cadre of senior man-agers, the Japanese "advisers" or "coor-dinators," had no operating responsibil-

ities at all. The adviser, a familiar figurein foreign subsidiaries of Japanese com-panies, originally served as a consultanthelping in the application of innovativeJapanese management practices. Thatrole, however, became redundant as fa-miliarity with Japanese practices spread.Yet the advisers remained, doing littleexcept undermining the authority ofline managers. So at Nissan, we elimi-nated the position and put all our ad-visers into positions with direct opera-tional responsibilities. I also redefinedthe roles of the other Nissan managers,as well as those of tbe Renault people1 had brought with me. All of them now

The following tablelists the nine cross-functional teamsthat produced theNissan RevivalPlan, showing theircomposition andthe objectives theyidentified.

Nissan's Cross-Functional Teams.

Team BusinessDevelopment

CFT Leaders • executive VP of overseassales & marketing

• executive VP of prod uctplanning

Purchasing

' executive VPof purchasing

' executive VPof engineering

Manufacturing& Logistics

' executive VPof manufacturing

• executive VPof product planning

Research& Development

• executive VPof purchasing

• executive VPof engineering

CFT Pilot •general manager ofproduct planning

• general managerof purchasing

• deputy general managerof manufacturing

• genersl managerof engineering

Functions • product planningRepresented • engineering

•manufacturing• sales & marketing

•purchasing'engineering• manufacturing•finance

manufacturinglogisticsproduct planning

'human resources

'engmeenng• purchasing' design

Team • profitable growth -supplierReview -new product relationships

Focus opportunities 'product• brand identity specifications• product development and standards

lead time

• manufarturingefficiency and costeffectiveness

R&D capacity

ObjectivesBased on

Review

' launch 22 new modelsby 2002

'introducea minicarmodel by 2002injapan

• cut number ofsuppliers in half

• reduce costs by20% over threeyears

• close three assemblyplants injapan

•close two power-trainplants in Japan

•improve capacityutilization injapanfrom 53% in 1999 to82% in 2002

•move to a globallyintegrated organization

•increase outputefficiency by 20%per projert


Saving the Business Without Losing the Company • FIRST PERSON

have line responsibilities, and everyonecan see exactly what their contributionsto Nissan are. When something goeswrong, people now take responsibilityfor fixing it.

Mobilizing Cross-FunctionalTeamsAll these changes were dramatic ones.They went against tbe grain not only ofNissan's long-standing operating prac-tices but also of some of the behavioralnorms of Japanese society. I knew that ifI had tried simply to impose the changesfrom the top, I would have failed. In-stead, I decided to use as the centerpiece

of the turnaround effort a set of cross-functional teams. I had used CFTs in myprevious turnarounds and had foundthem a powerful tool for getting linemanagers to see beyond the functionalor regional boundaries that define theirdirect responsibilities.

In my experience, executives in a com-pany rarely reach across boundaries.Typically, engineers prefer solving prob-lems with other engineers, salespeoplelike to work with fellow salespeople, andAmericans feel more comfortable withother Americans. The trouble is thatpeople working in functional or re-gional teams tend not to ask themselves

as many hard questions as they should.By contrast, working together in cross-functional teams helps managers tothink in new ways and challenge exist-ing practices. The teams also provide amechanism for explaining the necessityfor change and for projecting difficultmessages across the entire company.

Within a month of my arrival, we hadput together nine CFTs. Their areas ofresponsibility ranged from research anddevelopment to organizational struc-ture to product complexity. Together,they addressed all the key drivers ofNissan's performance. (See the table"Nissan's Cross-Functional Teams" for

Sales& Marketing

• executive VP of overseassales & marketing

• executive VP of domesticsales & marketing

•manager of overseassales & marketing

• sales & marketing•purchasing

•advertising structure•distribution structure•dealer organization• incentives

•move to a single globaladvertising agency

* reduce SC&A costs by 20%• reduce distributionsubsidiaries by 20%injapan

•close 10% of retailoutlets injapan

•create prefecturebusiness centers orcommon back offices ^ f f l

JANUARY 2002

General& Administrative

•executive VPof finance (CFO)

•senior VPof finance (DCFO)

•manager of finance

•sales & marketing• manufacturing•finance•human resources

• fixed overhead costs

• reduce 5C£(A costsby 20%

•reduceglobal headcount by 21,000

Finance & Cost


• senior VPof finance (DCFO)

• depu^ generalmanager of finance

•finance•sales & marketing

•shareholdings andother noncore assets

•financial planningstructure

•working capital

•dispose of noncoreassets

•cut automotive debt inhalf to $5.8 billion net

•reduce inventories

Phaseout of Products& Parts ComplexityManagement

• executive VP of domes-tic sales & marketing

•executive VP ofproduct planning

• manager of productplanning

• product planning•sales & marketing• manufacturing•engineering•finance•purchasing

• manufacturingefficiency and costeffectiveness

•reduce number of plantsin Japan from seven tofour by 2002

•reduce number ofplatforms injapan from24 to 15 by 2002

•reduce by 50% thevariation in parts (due todifferences in engines ordestination, for example)for each model

Organization


•executive VPof manufacturing •

•manager of humanresources

•product planning• sales & marketing ^•manufacturing H•engineering H•finance ^•purchasing

•organizational •structure fl

•employee incentive •and pay packages •

• create a worldwidecorporate headquarters

• create regional man-agement committees J

• empower program Hdirectors H

•implement Hperformance-oriented Hcompensation and Hbonus packages, Vincluding stock options

41


a detailed description of the teams, theirareas of responsibility, and the princi-pal changes they instigated.)

We put the teams to work on a fasttrack. They were given three months toreview the company's operations andto come up with recommendationsboth for returning Nissan to profitabil-ity and for uncovering opportunities forfuture growth. The teams reported toNissan's nine-member executive com-mittee. And though the CFTs had nodecision-making power - that was re-tained by the executive committee and

myself-they had access to all aspects ofthe company's operations. Nothing wasoff limits.

The CFTs consisted of approximatelyten members, al! drawn from the ranksof the company's middle managers, thatis, peopte with line responsibilities. Lim-iting the members to ten ensured thatthe teams' discussions would moveforward at a reasonable pace; given theurgency of the situation, we could notafford to spend time in protracted de-bates. But we also recognized that ateam of ten people would be too few

Building Trust Through Transparency

For a turnaround process of this kind to work, people have to believe both that

they can speak the truth and that they can trust what they hear from others.

Buildingtrust, however, is a long-term project; those in charge have to demon-

strate that they do what they say they'll do, and that takes time. But you have to

start somev̂ 'here. Right from the beginning, I made it clear that every number

had to be thoroughly checked. I did not accept any report that was less than

totally clear and verifiable, and I expected people to personally commit to every

observation or claim they made. I set the example myself; when I announced the

revival plan, I also declared that i would resign if we failed to accomplish any of

the commitments we set for ourselves.

On a broader level, I also sought to impose transparency on the entire organi-

zation to ensure that everyone knew what everyone e!se was doing. Traditionally,

for example, the company's European and North American units operated inde-

pendently, sharing little information and expertise with the rest of the company.

Each unit had its own president and regional team, who were supposed to build

links to corporate headquarters and thus to the rest of the corporation. In reality,

however, the regional presidents and their teams were building walls, and there

was little cooperation between different parts of the company.

I decided, therefore, to do away with the post of regional president and an-

nounced the change in March 2000, six months after the publication of Nissan's

overall revival plan. Today, four management committees, meeting once a

month, supervise Nissan's regional operations. Each committee includes repre-

sentatives of the major functions: manufacturing, purchasing, sales and market-

ing, finance, and soon. I chair the committee forjapan, while the committees

supervising the European, U.S., and general overseas markets are chaired by

Nissan executive vice presidents based injapan. i also make sure that I attend

the European and North American committee meetings at least four times a

year. This reorganization was one of the few changes I made unilaterally, but it

was consistent with my commitment to transparency inside the organization.

to cover in any depth all the issues fac-ing it. To get around that problem, eachCFT formed a set of subteams, consist-ing of CFT members and other man-agers selected by the CFT. The sub-teams, each of which was also limitedto ten members, focused on particularissues faced by the broader teams. Forinstance, the manufacturing team hadfour subteams, which reviewed capac-ity, productivity, fixed costs, and invest-ments. Atl together, some 500 peopleworked in the CFTs and subteams.

To give CFTs authority within the or-ganization, we appointed to each teamtwo "leaders" drawn from the executivecommittee. These leaders served as theteam sponsors, who would smooththe way for the team as it conductedits work and remove any institutionalobstacles. Why two leaders rather thanone? Having two such senior voicesmade it less likely that the team wouldfocus its efforts too narrowly. For in-stance, we decided that Nobuo Okubo,Nissan's executive vice president for re-search and development, and ItaruKoeda, the executive vice president ofpurchasing, would lead the purchasingteam. Their voices would balance eachother, so that no single function's per-spective would dominate.

But it was also important that theCFT process not look like a corporate-imposed blaming exercise. The teamleaders, therefore, took a back seat inthe actual operation of the CFTs andattended few of the meetings. The tenregular members of each CFT carriedthe real work, and one of them actedas the team's "pilot," taking responsi-bility for driving the agenda and dis-cussions. The pilots were selected bythe executive committee, and the lead-ers and pilots together selected the restof the team. Typically, the pilots weremanagers who had frontline experiencewith Nissan's operating problems andcredibility with the rank and file. I tooka personal interest in their selection be-cause it gave me a chance to have a closelook at the next generation of Nissanleaders.

Setting up a clear process of this kindhas helped managers to become much



Jrom Cross-Function to Crnss-Cnmpany_

Cross-functional teamwork has been central to the Nissan turnaround. A similar

approach has also emerged as a key element behind the success of the Nissan-

Renault alliance.

At a certain point in negotiations between the two companies, there was a dis-

cussion about how they would work together Renault's negotiators assumed

that the best way forward would be to setup a series of joint ventures, and they

wanted to discuss all legal issues surrounding a joint venture; who contributes

what and how much, how the output is shared, and so forth. The Nissan team

pushed back; they wanted to explore management and business issues, not legal

technicalities. As a result, negotiations were stalled.

Renault CEO Louis Schweitzer asked me if I could think of a way to resolve

that impasse. I recommended abandoning the joint-venture approach. If you

want people to work together, the last thing you need is a legal structure that

gets in the way. My solution was to introduce informal cross<ompany teams

(CCTs). Some teams focused on specific aspects of automobile manufacturing

and delivery-there was a team focusing on product planning, for instance, and

another on manufacturing and logistics. Others focused on a region-Europe,

for instance, and Mexico and Central America, All told, we created n such

cross-company teams.

Through these teams, Renault and Nissan managers have found many ways to

leverage the strengths of both companies. The experience of the Mexico regional

CCT is a good example. At the time of the alliance in early 1999, Nissan was suf-

fering from overcapacity in the Mexican market because of sluggish

domestic demand and flagging sales of the aging Sentra model to the United

States. Renault, on the other hand, was thinking about reentering the Mexican

market, which it had abandoned in 1986. Putting managers from both compa-

nies together meant that they immediately recognized the synergy opportunity

In just five months, they put together a detailed plan for producing Renault

cars in Nissan's plants. Just over a year later, in December 2000, the first Renault

models rolled off the production lines.

The improvement in Nissan's manufacturing position has been dramatic.

AttheCuernavaca plant, the capacity utilization rate has risen from 53% at the

end of 1998 to nearly 100%. For Renault's part, the arrangement greatly accel-

erated its reentry into Mexico. In fact, Renault was able to begin selling cars

in Mexico even before the first Scenic rolled off the production line. Because

the Mexican government recognized Renault as a partner of the Nissan group,

Renault was able to immediately export cars to Mexico without having to obtain

separate government approval. What's more, Renault could use Nissan's local

dealers as distributors.

Todaythecross<ountry teams and tbe cross-functional teams bave comple-

mentary roles: The company CFTs serve as guardians of each company's revival

plan, while the CCTs feed the alliance.

more aware of what they can achieve ifthey put their minds to tbe task. Takethe purchasing team, which I had chal-lenged to find ways to reduce suppliercosts by 20% to bring Nissan in linewith other car companies. I suggestedthat a third of the savings could beachieved through changes to engineer-ing specifications, many of which werestricter at Nissan than at other com-panies. At first, the engineers didn'tbelieve that anything like the amountI was looking for could be found inspecification changes.

Yet by engaging in the CFT exercise,those very engineers proved themselveswrong, (n fact, they have been able todeliver far more cost savings than I hadexpected through identifying a multi-tude of small changes. For example, itturned out that Nissan's quality stan-dards for its headlamp parts were higherthan its competitors, even though therewas no discernible performance differ-ence. By making a small reduction instandards for the surfaces of headlampreflectors, Nissan was able to reduce therejection rate for that component to zero.Another small reduction in the specifica-tion for heat resistance allowed Nissanto use less expensive materials for thelenses and inner panels of the head-lamps. Together, the two changes de-creased the cost of headlamps by 2.5%.

The result of the CFTs'three-monthreview was a detailed blueprint for theturnaround, the Nissan Revival Plan,which I released to the public in Oc-tober 1999. This plan, developed byNissan's own executives, included themajor changes to Nissan's business prac-tices that I described earlier. They alsoprescribed some harsh medicine in theform of plant closures and head countreductions, all in Japan. Inevitably, ofcourse, the press focused on tbe way wewere challenging Japanese business tra-ditions - and on tbe staff cutbacks thatwere thought to be revolutionary in asociety used to guarantees of lifetimeemployment. But necessary and impor-tant as these changes were, they werenot the whole story.

Turning around a company in Nissan'sstate is a bit like Formula One racing. To

JANUARY 2002 43


take the highest-speed trajectory, youhave to brake and accelerate, brake andaccelerate all the time. The revival plan,therefore, was as much about futuregrowth (accelerating) as it was aboutcutting costs (braking). We couldn't say,"There will be a time for cost reductionand then a time for growth"-we had todo both at once. So along with the cut-backs and closures, the plan includeda number of major investment commit-ments, such as a $300 million invest-ment to produce Nissan models at Re-nault's plant in Brazil and a $930 millioninvestment for a new plant in Canton,Mississippi. We also announced ourentry into the minicar market in Japanand took back control of our opera-tions in Indonesia. (For a summary ofthe revival plan and our performanceagainst it, see the exhibit "What theNumbers Show.")

The CFTs have remained an integralpart of Nissan's management structure.I still meet with the pilots at least oncea month, and at least once a year, I re-ceive briefings from the full teams. Wehave even added a tenth team coveringinvestment costs and efficiency. Theteams' mission today is twofold. First,they serve as watchdogs for the ongoingimplementation ofthe revival plan. Sec-ond, they look for new ways to improveperformance. In short, they are my wayof making sure that Nissan stays awakeand fit.

The Importance of RespectAs might be expected, given the cut-backs we made in Japan, the public wasinitially uneasy about the revival plan,and I took a lot of the flak as the for-eigner in charge. Inside Nissan, though,people recognized that we weren't try-

ing to take the company over but ratherwere attempting to restore it to its for-mer glory. We had the trust of employ-ees for a simple reason: We had shownthem respect. Although we were mak-ing many profound changes in the wayNissan carried out its business, we werealways careful to protect Nissan's iden-tity and its dignity as a company.

That had been true even during theoriginal negotiations between Renaultand Nissan. As many people know, Re-nault was not Nissan's number onechoice for partner. DaimlerChrysler wasthe preferred counterpart, which onpaper was not that surprising, given itsfinancial muscle and reputation at thetime.While Nissan was negotiating withRenault, it had also been talking toDaimlerChrysler, and ! myself believedthat the two would probably close adeal. In the end, however, Daimler-

.What the Numbers Show

This table shows how successful the turnaround has been along the key performance dimensions laid out in the Nissan RevivalPlan. The company's objectives under the plan are marked in bold: to return Nissan to profitability by 2000, to Increase theoperating margin to more than 4-5% by 2002, and to reduce debt to below $5.8 billion by 2002.

FY99 results

Number of 148,000employees

FYOO results Preliminaryresults of1st half FY01

Forecastfor FYOl

133,800 128,100 N/A

Revival planobjectivesfor FY02

Operating margin

Operating profit

Net profit (loss)

Net automotivedebt

Capacity utilizationOapan)

Purchasing costreduction

Number of partssuppliers

1.4%

$6.8 million

($5.7 billion)

$11.2 bii l ion

53%

N/A

1,145

4.75*

$2.4 bil l ion

positive resultof $2.8 billion

$7.9 billion

51-1%

11%

810(30% reduct ion)

6.2%

$1.6 bil l ion

$1.9 bil l ion

$6.7 bil l ion

757%

N/A

750(35% reduction)

5-5%

$2.9 bil l ion

$2.8 bil l ion

less than$5.25 bil l ion

74-1%

more than18%

N/A

more than 4-5%

N/A

N/A

less than$5.8 billion

82%

20%

600(50% reduction)

127,000

Note: The conversion rate used was ¥i20 = $1.



Chrysler dropped out, believing thatNissan was too risky. In the words ofone Chrysler executive, bailing out Nis-san would have been like putting $5 bil-lion into a steel container and throwingit into the ocean.

With DaimlerChrysler out of the pic-ture, Renault was Nissan's only hope forsurvival. The other potential suitor.Ford, bad stepped aside long ago. Underthose circumstances, you might haveexpected Renault to tighten its termsfor dealing with Nissan. But Renault de-cided against exploiting its short-termbargaining advantage. We took the viewthat we were entering a long-term re-lationship. If we were to start by abusingour partner, we'd pay for it later. I be-lieve that Renault's decision to stick tothe terms it had offered Nissan beforeDaimlerChrysler dropped out contrib-uted greatly to preserving the moraleof Nissan managers at the start.

Since then, of course, cooperationbetween the two companies has dissi-

pated all fears of foreign domination.Although the needs of the turnaroundmeant that Nissan was at first more ofa ieamerthan Renault, the relationshipbetween the two companies has be-come evenly balanced. Renault peopleare now coming to learn from Nissan,and Nissan senior managers are trans-ferring their skills to Renault businessunits. Indeed, after just three years withNissan, I doubt anyone would say thatthe people I brought with me still be-long to Renault. They have probablycontributed a lot more to Nissan than toRenault. What's more, it sometimesseems to me that as Nissan's identitystrengthens, the North Americans, Eu-ropeans, and Japanese workitig here arebecoming much more alike than theyare different.

On the whole, 1 think Nissan's identityand culture as a company have been farmore important factors in its perfor-mance than its country of origin, and 1think this would be true for most com-

panies, in fact, looking to national cul-ture for an explanation of a company'sfailure or success almost always meansyou are missing the point. All that a na-tional culture does is provide the com-pany with the raw human resourcesfor competing. Obviously, if those re-sources are untrained or the businessenvironment is undeveloped, even thebest company can do little. But equally,no matter how promising your re-sources, you will never be able to turnthem into gold unless you get the cor-porate culture right. A good corporateculture taps into the productive as-pects of a country's culture, and in Nis-san's case we have been able to exploitthe uniquely Japanese combination ofkeen competitiveness and sense ofcommunity that has driven the likesof Sony and Toyota - and Nissan itselfin earlier times. ^

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