Business Case Studies, Leadership, Carlos Ghosn as CEO of Nissan and Renault: Can He Rework the ĎNissan Magicí?

Tell A Friend

Carlos Ghosn as CEO of Nissan and Renault: Can He Rework the 'Nissan Magic'?

"We knew some people were concerned about the potential for culture clashes, between the French and the Japanese, but it was not an issue. Cultural differences should be used as a catalyst for change, not as a crutch that inhibits change. You can learn a lot from somebody who is not like you."1

- Carlos Ghosn, CEO, Nissan.

"Make sure you are focused on your own people. Bring in them motivation and sense of ownership, then you can do your miracle."2

- Carlos Ghosn, CEO, Nissan.


In 2002, Louis Schweitzer, CEO of Renault announced that Carlos Ghosn, the president and CEO of Nissan would also take over the reigns at Renault in April 2005, while Schweitzer would remain the chairman of the board. With the new position , Carlos Ghosn would lead two companies Nissan and Renault. As of 2004,Renault held 44%stake in Nissan and Nissan owned around 15%of Renault's shares. 'Turnaround artist', as Carlos Ghosn was called was behind the industry's most remarkable turnaround at Nissan. After he became the CEO of Nissan in 1999, he had brought in many un-Japanese changes in the Japanese company and had actively persuaded the employees to accept change. Carlos Ghosn was credited for reviving the company from$254million losses and $19billion debt in 1999 into profits within two years.
After taking up his position as the CEO of Renault in April 2005,CarlosGhosn is likely to face many challenges. Heading two different automobile companies from two different countries was first of its kind and industry observers expressed doubts whether Ghosn would be able to take up the pressure and rework the 'Nissanmagic'.

Carlos Ghosn: The 'Nissan Magic'

In March 1999,Renault, the then ninth carmaker in the world announced its alliance with 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 in US. By the end of 1990s,Nissan exported cars to Europe 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. Nissanís market share had dropped from 6.6 %in 1991 to 4.9%by late 1990s.
Renault at the same time was expanding internationally through acquisitions. After the unsuccessful merger with Volvo, Renault under Louis Schweitzer entered into an alliance with Nissan acquiring a 36%stake in the company. Triggering the alliance was Nissanís strength in product designs and sophisticated manufacturing that blended well with the engineering quality at Renault. For Renault, the alliance would help in international expansions in the long-term while for Nissan; it was to get rid of its short-term troubles that had accumulated.

Initially industry observers were skeptical about a non-Japanese manager 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 the middle-level managers in the company. Carlos Ghosn 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 too much about Japan before coming, because I didnít want to have too many preconceived ideas. I wanted to discover Japan by being in Japan with Japanese people."4 On the first day, when Carlos Ghosn arrived at Nissan, he took an elevator to reach his office. As he entered the lift, which was already packed with workers who were coming up from garage, everyone knew he was the new CEO. To his surprise, at every floor the lift stopped, none got down. Finally, when he got down, the employees bowed as he left and went back to their floors. After such an unexpected incident, which reflected major cultural difference, Carlos Ghosn realized how important it was to understand them. Since the first day, Carlos Ghosn had made the cultural diversity a catalyst rather than a crutch for the company.5

Next >>

1]Carlos Ghosn's interview, "Interview: The road to ruin",, December 2002
2]Parachkevova, Anna "CEO outlines Nissanís resurgence",, May 12th 2004
3]Carlos Ghosn joined Michelin in 1974, where he was chairman and CEO of North American operations and had undertook several cost cutting initiatives.
4]"Carlos Ghosn: standing at the global crossing",, April 5th 2002
5]"Throwing away the culture crutch", 2000 Automotive News World Congress, January 18th 2000

Contact us: IBS Case Development Centre (IBSCDC), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad-501203, Telangana, INDIA.
Mob: +91- 9640901313,

©2003-2009 IBS Case Development Centre. All rights reserved. | Careers | Privacy Policy | Terms of Use | Disclosure | Site Map xml sitemap