Business Case Studies, Leadership, Carlos Ghosn as CEO of Nissan and Renault: Can He Rework the ‘Nissan Magic’?

 

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Carlos Ghosn: The 'Nissan Magic' Cont...

The most un-Japanese practices like closing plants and cutting work force, in a country, which believed in lifetime employment, were the biggest of all challenges. When he planned to close five plants which included both assembly plants and power train plants, the board of directors were not informed until the night before, as Carlos Ghosn knew some people within the company wanted his plans to fail. After he announced, he was reported to have threatened, "If this leaks out, I'll close seven plants, not five."¹³ For Carlos Ghosn, convincing the labor unions over the disadvantages of rigid job definition was a big task.

The seniority-based promotion that was entrenched in the Japanese firm was replaced by a performance based and merit-based incentive system. Instead of sacking people, which was against the culture in Japan, 21,000 jobs were cut through retirements, pre-retirements and golden handshakes out of which 16500 were in Japan alone. The plants were closed, while offering alternative jobs to the employees in other plants of the company. The complex manufacturing structure, which involved 24 platforms at seven assembly plants, was brought down to 12 platforms, which were shared by four plants. Around 10%of the retail outlets were closed and 20%of the dealer affiliates was streamlined to further reduce selling and marketing expenses. After the phase one of the revival plan was over, Nissan reported profits of $1.5 billion for six months between April to September, which was the best results the company had ever seen. At the same time, Carlos Ghosn began to be called an iconoclast, who had brought in some un-Japanese, western style of culture in the company’s operations. He, in contrast to the traditional Japanese business etiquettes, shook hands with his partners and other executives. As a result, there was discontent among the traditionalists and other industry associations in the country. And his bold decisions like closing plants, had invited repugnance among many including the insiders and Ghosn began to take along a bodyguard wherever he went

The cross-cultural merger between a French and a Japanese firm, raised several other challenges. The alliance aimed at cost savings through sharing of platforms and engineering capabilities. Initially though the employees and the design engineers were convinced over the superiority of the platforms brought in from the Renault plants, they were reluctant to adopt them. To overcome resistance, regular meetings were conducted among the Nissan and Renault employees. While at the same time, Carlos Ghosn began to recruit more designers from Japan to design new models. He maintained that the best way to solve the cultural differences was to avoid forcing the cultural blend. Rather, he believed in appreciating the differences between the cultures and minimizing the cultural clashes by bringing in a performance-driven management. To ensure that the Japanese staff understands what the French managers spoke, English was made the common language in the company. A dictionary of 100 key words used by them management was prepared to solve the differences in the way each work was interpreted by French as well as Japanese. The words included 'commitment', 'transparency', 'objectives', and 'targets' etc.

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13]"Nissan’s boss", www.businessweek.com, October 4th 2004