Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code :LDS0007

Year : 2005

Industry :Automobiles

Region : Europe

Teaching Note:Available

Structured Assignment :Available

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Introduction: InMarch 1999,Renault, the then ninth carmaker in the world announced its alliancewith Nissan investing $5.4 billion. Nissan was in losses for many years from 1990-1999 except for profits reported in 1997(Annexure I) and looked out for partners to recover from the troubles. The brand recognition was very low and it was estimated that Nissan was losing $1000 for every car it sold inUS.By the end of 1990s,Nissan exported cars toEurope and Australia and some parts of Asia. The company was in losses to the tune of $5.5 billion, had debts totaling around $19 billion and was suffering from a poor product portfolio and diminishing brand value. Nissan’s market share had dropped from 6.6 %in 1991 to 4.9%by late 1990s.

Renault at the same timewas expanding internationally through acquisitions.After the unsuccessfulmerger with Volvo, Renault under Louis Schweitzer entered into an alliance with Nissan acquiring a 36%stake in the company. Triggering the alliance was Nissan’s strength in product designs and sophisticatedmanufacturing that blended well with the engineering quality at Renault. For Renault, the alliancewould help in international expansions in the long-termwhile for Nissan; it was to get rid of its short-termtroubles that had accumulated.

Initially industry observerswere skeptical about a non-Japanesemanager successfully leading a Japanese firm.While Carlos Ghosn was successful in cutting costs and had sometimes imposed hard regimes during his tenure atMichelin3 , many were apprehensive if he would be successful in Japan. He was 46 when he joined Nissan and was far younger than themiddle-levelmanagers in the company. CarlosGhosn knew nothing about Japan and had no knowledge of the culture there. He once said that he had a ‘very vague’ idea about the country and accepted, “I did not try to learn toomuch about Japan before coming, because I didn’t want to have toomany preconceived ideas...