CEO outlines Nissan's resurgence

by Anna Parachkevova | 5/12/04 5:00am

Record-setting revenues, zero debt and an industry-leading operating margin -- all of these achievements make Nissan a world leader in the auto-sale industry. But just five years ago the company was mired in debt and plagued with declining sales.

President and CEO of Nissan Motor Co., Carlos Ghosn, credited with the company's remarkable revival since 1999, spoke about his recipe for success before a mixed crowd of graduate and undergraduate students in Cook Auditorium on Tuesday.

When Ghosn took over in 1999, production and sales were in decline, the average operating margin had remained at 1.3 percent for almost a decade and the accrued debt reached $20 billion, the CEO said.

Nissan could have sought a business alliance to pull the company out of the financial quagmire. But the company's poor profit record led many companies to turn down partnership offers.

The Brazilian-born Ghosn started the revival process by learning more about the company and about Japan in general. "I did not know anything about Japan or about Nissan, so I started talking to people. All the advice I got there was 'don't move this, don't touch that," Ghosn said.

Ghosn quickly realized that saving the company required a paradigm shift that would lead the way to recovery.

He launched the Nissan Revival Plan in April 2000. In less then two years, the company's debt was completely eliminated, revenues skyrocketed and the operating margin increased from 1.3 percent to 10.8 percent.

Ghosn put these numbers in perspective by comparing them to those of Nissan's major competitors -- Toyota and Honda, which have operating margins of 9.7 and 7.2 percent, respectively.

An important component of the revival plan was the company's partnership with the French company Renault. Avoiding a merger, the alliance preserved the "freedom of each company to go after its own strategies." Maintaining the 'spirit of partnership" was essential, Ghosn said.

Commitment, motivation and high expectations were all pivotal to success, he added.

"There is one word important in the 21st century -- commitment, working day and night to meet your goals," Ghosn said.

Working with motivated people is another essential ingredient in the recipe for success, according to Ghosn, who called motivation a prerequisite for both creativity and commitment.

"You can have assets, money, brand, but if people are not motivated, you will lose everything," Ghosn said. "The story of Nissan is the story of people being fed up with being disregarded in the industry."

One way to maintain motivation is to safeguard identity and acknowledge achievement, he added.

Instead of replacing his predecessor's executive committee, Ghosn kept the whole team. "Keeping the people in place and changing the mind-set" can have a fast and lasting impact, Ghosn said.

"Changing the people gives only an illusion of change," he added "The main issue is a change of value and a change of behavior."

In wake of the success of the Nissan Revival Plan, the company has launched the Nissan 180 plan, which has three main commitments " one million vehicles sold, an 8 percent operating margin, and zero net automotive debt by the end of fiscal year 2004.

Starting next year, Ghosn will be the new CEO of Renault. While he is not planning on leaving Nissan, he said he would appoint a chief to oversee the company.

During the question and answer session, Ghosn was asked how he balanced his professional and family lives. Ghosn, married with four children, said that his family success is not quantifiable. He added that his family has helped him to be successful in his professional life.