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by Carlos Ghosn and Philippe Riès
Currency Doubleday © 2005, 232 pages, $25.95 (ISBN 0-385-51290-2)
Nissan’s Historic Revival
In 1999, the Japanese automaker Nissan was inching closer to bankruptcy every day until Carlos Ghosn (pronounced “phone”) — a Brazilian-born, French-educated son of Lebanese parents — became its chief operating officer (COO). Within a year and a half, the company was profitable once again. In only a few more years, Nissan was the world’s most profitable large automobile company. In Shift, Ghosn explains how he created and implemented the Nissan Revival Plan (NRP) which is responsible for Nissan’s radical transformation.
Before joining Nissan, Ghosn was an engineer who had risen through the ranks of Michelin in Brazil to become the company’s COO. Next, he was hired by Renault, Nissan’s parent company, as its COO. A year after joining Nissan, he was made president of that company. One year later, he assumed the position of president and CEO. In early 2005, Ghosn became the CEO of Renault while continuing as CEO of Nissan.
The Nissan Revival Plan
Shift describes the work that went into creating the NRP — a plan that consistently challenged the traditional thinking and practices of Japanese business when they inhibited the effectiveness of the company. The part of the NRP that made the biggest headlines was the elimination of 21,000 jobs from Nissan’s worldwide operation, most of which were in Japan, and the closing of five factories. When Ghosn revealed the NRP, he made four announcements:
1. Nissan would return to financial stability within a year of the implementation of the NRP.
2. Nissan’s debt would be reduced by 50 percent within three years.
3. Nissan’s operating margin would rise to 4.5 percent of sales within three years.
4. If these commitments were not fulfilled by the stipulated dates and at the stipulated levels, the members of the executive committee, including Ghosn himself, would hand in their resignations.
It turned out that Ghosn and his team kept their jobs by keeping their commitments. The revival of the Japanese carmaker became the most extraordinary success story of the automotive world in the new century. In 2003, Nissan became the most profitable large automotive manufacturer in the world, with an operating profit margin of 11.1 percent, and began hiring again.
According to Shift co-author Philippe Riès, the credit for Nissan’s success goes to Renault, which paid $5 billion in 1997 to acquire 36.8 percent of Nissan’s capital stock. Its alliance agreement stipulated that three executives from Renault would form part of a 10-member board of directors. Carlos Ghosn would become the executive in charge of the company as COO. Riès writes that the shared adventure of Renault and Nissan offers a living demonstration of what globalization can accomplish when it is managed with consideration for people and respect for their individuality.
Global Adventures and Experiences
After recounting Nissan’s rise from near bankruptcy to full recovery in a succinct preface, Shift continues with a complete description of Ghosn’s life from childhood through his studies at the best schools in France. These early global adventures and experiences show what it takes to create an effective leader for a global company.
While Ghosn was still studying in Paris, he received a call from an executive at Michelin. Ghosn writes that he had never thought about joining a large company, but when he learned that Michelin was looking for a Brazilian engineer with a French education to work in Rio de Janeiro, and was offering a very attractive contract, he decided it was exactly right for him. While at Michelin, Ghosn came up with the principle known as “cross-manufacturing,” or utilizing the same production line for the manufacture of products sold under two or more brands. He explains that this idea would serve him well in various future circumstances.
In 1996, Ghosn was approached by a headhunter who offered him a chance to become second-in-command at Renault. Knowing that he had no chance of getting to the top of the family-run Michelin, he joined Renault as COO. At Renault he would make a name for himself — le cost killer — by cutting the company’s costs by more than 20 billion francs. In 1999, Renault unveiled the Renault-Nissan Alliance, and Ghosn moved from France to Japan to make the cross-cultural global alliance work.
The rest of Shift focuses on what Ghosn did to make his new job and new company an amazing success story. ~
Why We Like This Book
After an exciting look at the history of a modern leader who was able to have a positive impact on several global companies, Shift provides many lessons that other organizational leaders can gain from his story: Credibility rests on performance and transparency; in crisis, communication must be concentrated; make changes for the sake of performance, not for the sake of change; an alliance requires a clear definition of the rules and a good deal of attention paid to the other partner; and manage for success by starting with facts. ~