lessons learnt from nissans historic revival

© DKD 5th JANUARY 2007

“SHIFT”

LESSONS LEARNTFROM

NISSAN’S HISTORICREVIVAL


Excerpts from SHIFTThe Historic Revival of Nissan

Carlos Ghosn “Le Cost Killer”Personal Glimpse

1. Grandfather, Bichara Ghosn, a Maronite Christian (eastern Catholic) , emigrated from Lebanon to Brazil. He worked hardan eventually owned 3 businesses, agricultural products trading, rubber and air transport operation. He had eightchildren, 4 boys and 4 girls.

2. Father, Jorge Ghosn took over the air transport business. Married Rose, who was born in Nigeria and educated with theSisters of Besancon, guardians of the Catholic faith and French culture in Lebanon. They had 2 children, Carlos andClaudine.

3. Carlos was educated at the Collège Notre-Dame until high school in Lebanon. In Paris, attended the Lycèe Saint-Louis inpreparation for admission into the Ècole Polytehcnique. Graduated from the Ècole des Mines in 1978.

4. Recruited by Michelin to work in Brazil, however he spent the earlier 7 years in Europe. He became the General Managerof Michelin factory in Pyu-en-Velay in 1981 at the age of 27. He left for Michelin Brazil in 1985 with his wife Rita. In 1989he left for Michelin USA as the CEO.

5. Joined Renault in October 1996 as executive Vice-President in charge of purchasing, research, engineering anddevelopment after being recruited by Louis Schweitzer.

6. Developed the 20 Billion plan aimed at cost reduction of Renault vehicles i.e. a cost reduction of 9,000 to 10,000 francsper car in three years.

7. Became the COO of Nissan in 1999. Developed the NRP (based on the 20 Billion Plan). By March 2002, achieved thefollowings: Reduce purchasing costs by 20%, Reduce General Expenses by 20% (inclusive of marketing expenses),Reduce the number of network subsidiaries by 20% and a 50% debt reduction.

8. However, he and the Nissan Management and the Board of Directors committed the followings ate the Tokyo MotorShow in 1999: A return to profitability by 2000, achieve profit margin in excess of 4.5% and a 50% reduction in debt by2002.

9. Subsequently developed the Nissan 180 and the Nissan 3-3-3 for growth.



Carlos Ghosn “Le Cost Killer”Personal Development Insights

1. At Michelin Paris, went though a rigorous 3 months PS – personnel service – training at Michelin where employeesattended a series of lectures whilst at the same time were given real life problems to solve that actually arose in thecompany. After the completion of PS, went through another phase of training related to personal specialty. He chosemanufacturing as he believed that’s where everything happens – you have to know the product, the people who made itand the management and spent 3 months at the shopfloor!

2. At Michelin Brazil, “To deal with the debt, the first thing we had to do was to establish a positive cash-flow. Second, wehad to cut necessary investments to the minimum, reduce our inventories, shorten our customers’ terms of payment, andsell any assets that didn’t seem indispensable”.

3. At Michelin USA, “I don’t see how one can manage a business without keeping an eye glued to expenses. If you aremanaging a business, you can’t use your imagination when it comes to costs. You have to be precise about your debtsand your expenses”.

4. Relationship with Headquarters, “Functional relations are important; nonetheless, the head office had to respect theautonomy of the local operation team. This kind of balance is difficult to achieve. If there’s little autonomy, you can’tcontrol anything, because you don’t know who’s responsible for what. You wind up stripping the whole system ofresponsibility”.

• “Even the best organizational ideas are worth nothing if they aren’t communicated and supported clearly, with athoroughly concrete explanation of why and how”

• “When you take charge of a factory, you have to establish bonds. So the first thing to do is create a team”• “If you are a supplier, you have to be particularly attentive to your costs and careful in your price negotiations”.• “You have to sell a product that people are both willing and able to pay”.• “Lying or covering-up accomplishes nothing. You have to describe things as they are, and you especially have to

describe it clearly, in a way that everyone listening to you can understand”.• “If an exercise consists solely in demanding more and more from the supplier, without modifying your relationship

with him, that’s not going to last long”.• “When you start thinking about leaving, choose your moment carefully. Go out while you are still on top, not when

you’re no longer in control of events”.• “You’d always rather be a pastor in a village than a bishop in Rome”.



Carlos Ghosn “Le Cost Killer”At Renault

1. An automobile is the object of both reason and emotion. Automobile manufacturers are architects more than anythingelse. They work with people across a vast range of trades and professions. There are multiple challenges, your situationis characterized by permanent uncertainty. At a given time, you may attain that level of mastery, but you can never becertain that it will last. That’s why changes in management are very risky even though they’re often indispensable.

2. Difficulty at Renault:

1. Organized into completely separate departments, like silos Implement cross-functionality.2. Employee morale - failure in North America, AMC; failed projected merger with Volvo Speed in execution,

integrated company with strong personality. Maintain good employee relations whilst achieving high productivity atthe same time.

3. “Our Cars are too Expensive” The 20 Billion Plan, cutting costs from 9,000 to 10,000 francs per car for 3 years.4. Communication, particularly bad news Prepare the ground, put all the facts out in the open.5. Low productivity Benchmark Nissan Sunderland Plant, UK.6. “Small” size Search for an alliance.

3. “Any alliance, whatever its terms, costs a great deal of effort”. Whether a partner is big or little, a merger offers the sameorders of difficulty.

4. Comments on Renault's proposed merger with Nissan:

• Jacques Calvet, former PSA CEO, “In my opinion, the drawbacks, the financial risk, the juxtaposition of twoproduct lines more competitive than complementary, and above all the enormous difficulty of making two teams,culturally light-years away from each other, work together, all seemed to outweigh the potential advantages”.

• Bob Lutz, estimated that carrying out the Nissan operation would be the equivalent of Renault, of putting $5 billionin a containership and sinking it in the middle of the ocean.



Carlos Ghosn “Le Cost Killer”Arriving in Japan

1. Tokyo was and remains the most expensive city in the world.

2. The language barrier was huge. You are really constrained, because you feel dependent on other people for everything.The culture’s different. The customs are different.

3. There is no such thing as a “Japanese Carmaker”.

4. The common characteristics however are: A taste for technology, a determination to refine and improve he industrialprocess, and an insistence on quality, and very meticulous!

5. The Japanese aren’t champions of theory. Their strong suit is to start from simple, pragmatic observation and to try tocreate a solution for that, e.g. the TPS – elimination of wastage from raw material, time and space.

1. Honda relied on pragmatism, technical excellence and expertise.

2. Toyota, very aloof, imperious and very sure of itself. On one side there was their system, on the other side, therest of the world. Very slow to venture abroad, but once it did, it advanced like a steamroller!

3. Nissan moved beyond the archipelago first, but compared to Toyota and Honda, its image is a little hazy. It wascapable of operating at a high technical level, but its corporate personality was confused.

6. Nissan – The company is in such a sorry state of of deterioration that the solutions to its problems, if any, were going tohave to be found on the inside.

7. What had to be done was to reawaken passion, reconstruct a vision, rediscover a rhythm, put things back in phase, givethe company a project, deliver the impetus to carry it out.

8. In summary, what Nissan need is FIRE, INTENSITY and LIGHT.



Carlos Ghosn “Le Cost Killer”Assembling A Team

1. Between March and July 1999, extensive analysis made on Nissan to determine which areas would require whichpersonnel.

2. Renault’s team consist of: Engineering - credibility in Engineering & Technology, Finance – ensuring a well managedtreasury (Investments, Purchases, Cash-flow Management, FOREX, Consumer Credit, Raw Material Trade, Expensesetc.), Communication, Human Resource, and others totaling 30 in all.

• Enthusiastic about going to Japan..

• Open-minded.

• Competent.

3. It would have been unrealistic to try to force change on Nissan’s culture all at once. Nissan had to be changed from theinside.

• “We are not missionaries! We’ve come here not to change Japan but to straighten Nissan with the men andwomen on Nissan.”

• “We’re the ones to assimilate with them – it’s up to them to adapt to us. Nissan's people are going to revive thecompany, and we are here to help them.”

4. A bridge-building approach, founded on reason but on emotion as well, basically oriented toward objective performanceand toward restructuring the company. “We’re doing this not to satisfy Renault, We’re doing this as it would create morewealth for the Renault-Nissan Alliance”.

5. It’s a long-term approach: You lead a company through its revival, you create wealth, and you give positive reinforcementto the people who contribute to the effort”.

Competent, enthusiastic, open-minded peoplecapable of engaging in a real dialogue!

Competent, enthusiastic, open-minded peoplecapable of engaging in a real dialogue!



Carlos Ghosn “Le Cost Killer”Analyzing the Patient

1. By March 1999, I knew the company was performing badly. I’d looked at the books, the past and present results, the netoperating profit after taxes, the results posted by the different subsidiaries, and the various segments of the market. Theoverview wasn't exactly dazzling! Te company’s deterioration was obvious, but I had no idea abut the real cause ofdestruction.

2. I suspected management problems, strategic problems, problems involving imprecision and lack of coordination, but Ididn’t have a clearer idea than that. I spent most of spring 1999 examining Nissan from every angle: Inside & outsideJapan, in offices, factories, and technical centers; in conversations with suppliers, dealers, and customers. I askedpeople what they thought was going right, what they thought was going wrong, and what they would suggest to makethings better. I accumulated documents that contained very precise assessments of the different situations we had todeal with and I drew up my personal summaries of what I learned.

• The suppliers all had an interest in the company's’ recovery, but Nissan’s supply system is fragmented and thecompany’s forecasts were ridiculous.

• Nissan’s New Union Organization had the facto joint management. However, the Union’s remarks were,”As longas we believe that you’re acting constructively and taking our remarks and observations into account, we won’t doanything to hinder the revival process”.

3. The image of Nissan was that of a disjointed, confused company. Everyone was pulling in a different direction. We hadno Vision, no Strategy, no Priorities, no measuring tools. The was no coherence, no sense of timing.

4. Either I was going to have to shine a light everywhere, or I was going to have to have people around me whose job it wasto illuminate problems so that everyone could see them clearly and know what had to be done!

5. Chief reasons for Nissan’s plight:1. Nissan wasn’t really engaged in the pursuit of profits. You have to place profit at the center of your concerns. No

magic is going to bring it about.2. There was a lot of talk about customer at Nissan, but the customers had little presence in the company. There was

no product planning process that included consideration of the customer and the market.3. There was a lack of urgency. No one seemed to feel we had an emergency. The notion of time didn’t exist. You

have to identify the problem and circulate your diagnosis. It’s not possible to ask people around you to understandwhat’s going on if you refuse to share the facts with them.

4. The incredible compartmentalization of the company. Observing this great discrepancy between the high quality ofNissan’s Teamwork and the mediocrity of its Cross-Functional efforts was much more surprising.

5. The Company had NO STRATEGY! A total absence of VISION.


NISSAN’S SITUATION IN 1999

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NISSAN – 1999, MarchBefore the NRP

SOURCE: SHIFTInside Nissan’s Historic Revival

Carlos Ghosn – Jan 2005



Carlos Ghosn “Le Cost Killer”On the Drawing Board

1. In a certain way, making a plan for rebuilding a company is an engineering job. There are priorities, stages, limits,specifications. You begin with the foundations. You have to establish a time-table and a budget. And, of course, you haveto have a firm commitment on prices and deadlines.

2. Cross-Functional Teams – the key success to the Nissan Revival Plan (NRP) – because it’s necessary to engage thosewho would be charged with carrying out the plan. Imposing changes from the Top-Down would immutably fail. The ideawas to tear down the walls, whether visible or invisible. Nine cross-functional teams that would cover the entire spectrumof reforms focusing on:

1. Business Growth – New Products, New Services, New Markets.2. Purchases – representing > 60% of a manufacturer’s expenditures.3. Manufacturing and Logistics – quality, productivity, efficiency and cost reductions.4. Research & Development – Vehicle, Powertrain, Technology.5. Sales & Marketing – Efficiency of Distribution, Marketing and Sales.6. General and Administrative Services – Cost optimization7. Finance – Profitability, Investments, Purchases, Cash-flow Management, FOREX, Consumer Credit, Raw Material

Trade, Expenses.8. Product, Equipment and Service Phase-outs – freeing-up capital.9. Organization and Value-Add – ensuring speed of decision and execution, communication and transprency.

The average team was made up of ten people, middle level managers with direct responsibilities. And, every team hadsub-teams or cells, each with ten members as well.

What were theopportunities that

each functionhad identified foritself or that hadbeen mentionedby other sectors.

What were theopportunities that

each functionhad identified foritself or that hadbeen mentionedby other sectors.

WHY?WHY?

Test the company’swillingness to

accept often radicalmeasures that

overturnedestablishedpractices

Test the company’swillingness to

accept often radicalmeasures that

overturnedestablishedpractices

Establish Goalsdeveloped fromObjective Data,Cross-functionalteam’s estimatesbetween ambition

and realism

Establish Goalsdeveloped fromObjective Data,Cross-functionalteam’s estimatesbetween ambition

and realism

Move and executequickly.

Not to get caught inthe quicksand of

“JapaneseConsensus”

Move and executequickly.

Not to get caught inthe quicksand of

“JapaneseConsensus”

ACTIVE CONSENSUSACTIVE CONSENSUSTARGETS & DEADLINESTARGETS & DEADLINESSTRATEGIC DIRECTIONSTRATEGIC DIRECTIONCURRENT ISSUESCURRENT ISSUES

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5% of the WORK5% of the WORK 95% of the WORK95% of the WORK


1. October 18th, 1999 at the Tokyo Motor-Show, presentation of the Nissan Revival Plan (NRP), till then unprecedented inJapan, a “picture” of the revival plan complete with numbers, curves, graphs and texts utilizing huge screens.

2. Approach to the NRP – “As you know, in the automobile business, there’s no problem at a car company that goodproducts can’t solve.”


Carlos Ghosn “Le Cost Killer”Shock Therapy

1. Nissan’s share in the global market hasbeen in continuous decline from 6.6% in1991 to 4,9% in 1999.

2. Annual production has fallen by 600,000vehicles.

3. Difficulty in maintaining profitability since1991. FY Mar’00, record loss of ¥ 684Billion ~ US$ 6 Billion.

4. Net debt burden ~ ¥ 1,400 Billion ~ US$12.6 Billion.

1. Nissan’s share in the global market hasbeen in continuous decline from 6.6% in1991 to 4,9% in 1999.

2. Annual production has fallen by 600,000vehicles.

3. Difficulty in maintaining profitability since1991. FY Mar’00, record loss of ¥ 684Billion ~ US$ 6 Billion.

4. Net debt burden ~ ¥ 1,400 Billion ~ US$12.6 Billion.

CURRENT SITUATIONCURRENT SITUATION

1. Failure to concentrate on profit making.2. Neglect on its customers.3. Weakness in cross-functional works.4. General absence of the sense of

urgency.5. Lack of a common long-term vision.6. Poor brand image.

1. Failure to concentrate on profit making.2. Neglect on its customers.3. Weakness in cross-functional works.4. General absence of the sense of

urgency.5. Lack of a common long-term vision.6. Poor brand image.

PROBLEMS DIAGNOSISPROBLEMS DIAGNOSIS

1. Has established a significantinternational presence and deployed ona Global scale.

2. Has developed a world-class productionsystem.

3. In crucial areas, Nissan is on the cutting-edge of technology.

4. Nissan has formed an alliance withRenault.

1. Has established a significantinternational presence and deployed ona Global scale.

2. Has developed a world-class productionsystem.

3. In crucial areas, Nissan is on the cutting-edge of technology.

4. Nissan has formed an alliance withRenault.

ACCOMPLISHMENTSACCOMPLISHMENTS

1. Our aim is to reduce our purchase costs by 20% in the course of the next three years.2. My goal is to have fewer and simpler factories. We have decided to reduce our current capacity by 30% and aiming at 82% capacity utilization by

2002. We will reduce 24 manufacturing platforms in seven factories to 12 car platforms in 4 assembly plants.3. Our goal is to reduce by 20% our general expenses, including marketing and administrative expenses.4. In order to instill a stronger feeling of company spirit into our distribution network, we intend to reduce the number of our subsidiaries by 20%. In

addition we will close 10% of our dealerships.5. Today Nissan owns stock in 1,394 companies, in more than ½ of them, Nissan’s holdings exceed 20%. Our goal is to free-up capital currently

invested in non-strategic assets.6. Our forecast for FY 2000 will mean the elimination of 21,000 jobs, except R&D which will add 500 positions.

1. Our aim is to reduce our purchase costs by 20% in the course of the next three years.2. My goal is to have fewer and simpler factories. We have decided to reduce our current capacity by 30% and aiming at 82% capacity utilization by

2002. We will reduce 24 manufacturing platforms in seven factories to 12 car platforms in 4 assembly plants.3. Our goal is to reduce by 20% our general expenses, including marketing and administrative expenses.4. In order to instill a stronger feeling of company spirit into our distribution network, we intend to reduce the number of our subsidiaries by 20%. In

addition we will close 10% of our dealerships.5. Today Nissan owns stock in 1,394 companies, in more than ½ of them, Nissan’s holdings exceed 20%. Our goal is to free-up capital currently

invested in non-strategic assets.6. Our forecast for FY 2000 will mean the elimination of 21,000 jobs, except R&D which will add 500 positions.

NRP (Nissan’s Revival Plan)NRP (Nissan’s Revival Plan)

SUMMARY of theNRP

SUMMARY of theNRP

Return to profitability by2000.

Return to profitability by2000.

Profit margin in excess of4.5% of sales by FY 2002.

Profit margin in excess of4.5% of sales by FY 2002.

A 50% reduction in thecurrent level of debt.

A 50% reduction in thecurrent level of debt.

THE SHOCK OF MY ANNOUNCEMENT WAS PART OF NISSAN’S THERAPHYTHE SHOCK OF MY ANNOUNCEMENT WAS PART OF NISSAN’S THERAPHY

The PlanThe Plan –– Very precise, extremely factual, and highly quantified, in relaVery precise, extremely factual, and highly quantified, in relation to the performance to be achieved astion to the performance to be achieved aswell as to the deadlines set. The Plan left little room for intewell as to the deadlines set. The Plan left little room for interpretation.rpretation.


1. Nissan had to contend with a total lack of credibility – lack of credibility in the Brand, lack of credibility in the Company,lack of credibility in the Alliance. Credibility rests on 2 pillars: Performance and Transparency.

2. In crisis, communication has to be concentrated. It was obvious from the start that the head of the company had to be theone doing the communicating.

• “But no matter how different or original you may be, if you don’t produce results, you’re just a clown.”• “Questions were never a problem. What counts is the way you answer them.”• “Performance trumps everything. That’s what gives a company its life.”

3. It was essential that Nissan executes its new, transparency policy of continually making public its commitments andgoals.

4. Reconstructing our public image involved convincing our employees as well as our stockholders of our mission.Everything I’ve been able to do has been focused on motivating our people. All our accomplishments start from there.Motivating employees was an essential step in the company’s recovery.

5. But, the most significant thing we did was to present a completely different vision of the company. We said," If we reachour goals, this is what we will be in two years, and this is what we will be in five years.”

6. To rebuild a brand image you have to do several things:1. You have to define an ideal.2. You have to orient the company in such a way that every decision made tends towards that ideal.3. Once you have done that, the public – customers and others – observes the company, look at its ads, listens to its

messages, uses its services, meets its representatives, and perhaps buy its products.4. In the process people form an image of your ideal, as they perceive it, and they reflect that back to you.5. The most we can say is, “ This is what we want to be” rather than, “We’re Nissan and this is what we are”.

7. We’ve never said that we wanted to be perceived as this or that. We work on creating an image. But it’s up to the publicto decide what that image is, and it’s up to us to observe the evolution of our brand image in the eyes of the generalpublic.


Carlos Ghosn “Le Cost Killer”You have to COM-MU-NI-CATE


1. The success of the Alliance would depend heavily on Renault’s and Nissan’s ability to preserve and reinforce theirrespective brand identities. In automotive industry, more than any other industry, the brand mage is a function of productdesign. Nissan had 2 problems in this area:

1. Design was subordinated to the director of engineering Design was cut-off from Engineering and put under thehead of product planning.

2. We had to find a design head who could symbolize Nissan’s revival, someone who had worked outside thecompany, someone with sufficient self-confidence and an international vision Shiro Nakamura from Isuzu washired.

2. Nissan’s financial management had to be revamped. Companies in the automotive business are great consumers ofcapital. An assembly plant capable of of producing 250,000 vehicles annually costs more than a billion dollars. Thedevelopment of an entirely new model costs several hundred million dollars. All Nissan’s financial functions, which hadbeen delegated to the various subsidiaries, to be centralized in Tokyo. One of the goals was the repatriation of allNissan’s debts to Japan, reducing the heavy financial charges in USA, Mexico and SEA. The spirit of responsibility andtransparency has caught on well. Headquarters is responsible for finalizing and deciding strategy, for policy in regard toproducts and brand image, and for the choice of the top managers. But once the budgets are fixed, they’re the ones whoare responsible.

3. The number of Nissan subsidiary dealerships was reduced through consolidation or outright sales. The goal is to have anetwork imbued with the entrepreneurial spirit – raising the bar in terms of performance and brand image, dealing withunresolved difficulties, creating a system of quick reaction to problems. Progress is measured not only by how much ourmarket share increase and how solidly the network returns to profitability, but also consumer satisfaction index and bycustomers’ purchase intent.

4. The key to everything, of course, was the launching of new products.

5. Products are events; their arrival is anticipated, coordinated, focused on; they are supported by strong advertisingcampaign and a good flow of information. That’s what the sellers want: a project, a strategy, product planning that makessense.


Carlos Ghosn “Le Cost Killer”DESIGN, DEVELOP, FINANCE and SELL


1. Although our initial intention wasn’t to change Nissan’s culture, the fact is that the company’s culture is constantlyevolving. We wanted to make change for the sake of performance. We change only those elements that are linked toNissan’s problems.

2. What was important wasn’t resolving all the dysfunctions of the company; it was detecting the most crucial ones anddealing with them. When a company has been winning over a long period of time, it’s the result of a strategy and of acertain quality of management.

3. Nissan’s problems:1. “It’s not me, it’s someone else” in response to problems.2. Areas of Executive responsibility were vague; Managers’ responsibility diluted by “Advisers” and “Coordinators”.3. System of advancement by Seniority, rather than based upon performance – which should determine salaries and

professional future; connection between performance and promotion was practically non-existent.4. Life-time employment -- Can’t be guaranteed, but to be pursued continually. Only companies with the highest level

of performance are capable of guaranteeing lifetime employment.

4. One of the prime responsibilities of a CEO is in preparing future leaders to succeed top-level positions:1. You allow people to prove themselves.2. Many people have an aptitude for leadership. They get sorted out according to the opportunities they have to

exercise and develop that aptitude. If you offer such chances on a large enough scale, you’ll be able to identify asufficient number of talented people.

5. Over the long-term, no power can stand against the failure to perform. Tomorrow’s leaders get their training by dealingwith today’s challenges. You have to take the ones with the most potential and send them where the action is – “they’vefaced difficult tasks and accomplished them”.

6. Employees remuneration would be tied to company’s performance via rewards or incentives. The idea of fairness is tiltedmore towards performance, and moving away from focusing on efforts to focusing on results.


Carlos Ghosn “Le Cost Killer”A NEW CULTURE


1. We’re entering a century that’s going to be increasingly marked by globalization, it’s a fact! However, besides thisopenness to globalization, there’s the desire on the part of people to maintain a sense of national identity. Globalizationand respect for national identity must go hand In hand. But, before long, only regional or local companies will be able todefine themselves in terms of nationality.

2. The future belongs to the globalized companies that seek to adopt the best practices and open themselves to the wholeworld, while at the same time trying to preserve their identity.

3. At Nissan: We’ve made English an everyday language. English is a tool, reduced for our purposes to its true dimension:a tool for globalization, for communication, and for cross-functionality.

4. For Renault and Nissan, learning to live together is more difficult. This a job that requires a daily effort. The Alliance ismaking progress because it respects individual and cultural identities. It can’t be accomplished passively. It’s deliberateand active. Preserving one’s identity implies a certain level of self-affirmation in dealing with others, but exchanging withothers implies a willingness to blend with them. The essential step in working together successfully is mutual respect.

5. Companies are made up of human beings, and so are their successes or their failures. Renault never took advantage ofNissan. Nissan has proved itself a worthy object of Renault’s hopes and has even surpass those hopes.

6. We’re on the way to understanding about tomorrow’s winners, at least in the automobile industry would be those that aretruly global, capable of according equal importance in all markets. It’s hard to be multi-cultural without being international,but the reverse isn’t true.

7. We want a partnership founded on a quest for performance, not on power relationships. The structure of the Alliance hasbeen remodeled, its capital relationship reinforced, and the integration of its functions (purchasing, informationtechnologies) accentuated. This evolution will continue, at a rhythm dictated by the goal of performance.

8. The aim of the Alliance is to cover the entire world with a minimum of duplication, avoiding making the same effort twice.

“World ranks and sales volumes are consequences, they aren’t goals.”


Carlos Ghosn “Le Cost Killer”MAKING THE ALLIANCE LIVE


1. Management model is not set in stone. It’s something you develop step by step. You test the model, and you adjust oralter it according to circumstances. My notion of management is that you start from facts and move towards theory, notvice versa. The most important phase in the development of the Nissan Revival Plan, the aspect that cost the most timeand effort, was the analytical phase, listening to people and observing conditions on the ground. Exchanges are veryimportant. In management, knowledge about situations is of prime importance, i.e. situational knowledge that combinesall factors such as facts, people, technology etc.

2. When a company runs into difficulties, it does so always and above all through its own fault. Of course, the existingconditions play a role. But the ultimate source of those problems is always inside the company.

3. “I have a simple vision of management. The boss takes upon himself the company’s past and future, whatever they maybe”. The first social responsibility of a CEO is to be the leader of the company, making certain that the vision of thecompany and of its future is known, understood, and shared by everyone. He must make certain that there’s a relativelysimple, clearly articulated, and universally known strategy for sustaining that vision, e.g.:

1. Nissan 180 – An increase of 1 million vehicles sales, 8% operating margin, total elimination of Nissan’s netautomotive debt for FY 2003 – 2005.

2. Strategy defined in simple terms: More revenue, competitive costs, higher quality, more speed, a stronger Alliancewith Renault,.

Everything is presented simply and clearly, and everything is quantified.

4. As the CEO, my responsibility is to be certain that everyone who works for Nissan is clear about his role as a necessarypart of the company. Along with this, I have to be careful to share the fruits of progress so that the people who work forthe company will be motivated.

“I am here because I have the ability to gather a group of people around me and get certain things done.Whatever talent I have for managing people has been more helpful to me than my formal education”

“Contrary to what some CEOs think, solving a company’s problem doesn’t require that you understand themin every detail; what you have to do is to make sure you’re surrounded by colleagues capable of

analyzing subjects in depth and summarizing them in such a way that you can make, or let someone elsemake the most appropriate decision”.


Carlos Ghosn “Le Cost Killer”MANAGING FOR SUCCESS


NISSAN’S SITUATION IN 2002

1.

Cla

rity

of

Vis

ion

&S

tra

tegy

2.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

3.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)

4.

Cu

sto

me

rO

rien

tation

5.

Sen

seof

Urg

en

cy

6.

Com

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

7.

Co

st

Orien

tation

8.

Com

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t9

.D

ecis

ion

Ma

kin

g&

Exe

cu

tion

Eff

icie

ncy

10

.S

upp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

11

.C

apa

city

Utiliz

atio

n

12

.N

um

be

ro

fP

latf

orm

s

13

.N

um

be

ro

fP

rodu

ct

Life

-C

ycle

s

14

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

15

.P

ers

onne

lM

otiva

tion

16

.R

&D

and

Te

chn

olo

gy

Inno

vatio

n

17

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

NISSAN – 2002, March After the NRP



NISSAN – 1999, MarchBefore the NRP


1. The question of a carmaker’s future can be posed in relatively simple terms: “DOES IT HAVE BOTH A COMPETITIVEPRODUCT AND THE CAPACITY TO KEEP IT COMPETITIVE?”

2. The automotive companies consolidation process is just about complete. The 6 top companies in the world account formore than 2/3rd of worldwide production, and the top 10 companies account for more than 90%. However, differentplayers survive and make progress in accordance with their ability to be competitive.

3. A carmaker’s ability to compete is founded primarily in innovation – innovation in product conception and planning as wellas technical innovation. Innovation is not a function of size. Innovation comes out of dealing with unusual situations.

4. Secondly, the ability to make continuous progress in quality. This encompass product reliability, the model’s seductivecapacity, interior and exterior design quality, materials quality, and quality of service.

5. We can’t think of an automobile without including its emotional dimension, because pleasure is so much a part of it. Theautomobile has an aesthetic dimension, it’s a symbol of independence, it grants status, it affirms the personality of itsowner. People often forms strong attachments to cars.

6. A full-range automotive manufacturer, must try to keep its prices constant while offering more performance, more safety,more quality, more durability, and more equipment in every new model – for a cost estimated each year at ~ 1% of themanufacturer’s operating margin.

7. A company’s ability to compete is whether it can control its costs.

8. Finally, the company must be able to optimize its development timing and manufacturing schedules.

“”Scale is no substitute for competitiveness. Within the Alliance we discuss performance not scaleadvantages – innovation, quality, and costs are important, that’s where the game is played”.

“what’s important isn’t the number of cars that you sell but the profit you make from them.”

American Market is the most profitable in the world – The product / market mix is the richest, volume is huge, and yetthere's only one culture..


Carlos Ghosn “Le Cost Killer”TOMORROW


END


PROTON’S 2006 SITUATION VS. NISSAN’S1999 SITUATION

1.

Cla

rity

of

Vis

ion

&S

tra

tegy

2.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

3.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)

4.

Cu

sto

me

rO

rien

tation

5.

Sen

seof

Urg

en

cy

6.

Com

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

7.

Co

st

Orien

tation

8.

Com

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t9

.D

ecis

ion

Ma

kin

g&

Exe

cu

tion

Eff

icie

ncy

10

.S

upp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

11

.C

apa

city

Utiliz

atio

n

12

.N

um

be

ro

fP

latf

orm

s

13

.N

um

be

ro

fP

rodu

ct

Life

-C

ycle

s

14

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

15

.P

ers

onne

lM

otiva

tion

16

.R

&D

and

Te

chn

olo

gy

Inno

vatio

n

17

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

18

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ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

NISSAN - 1997



PROTON - 2006


PROTON’S FUTURE REVIVAL IF IT WERETO EMULATE NISSAN’S HISTORIC REVIVAL

1.

Cla

rity

of

Vis

ion

&S

tra

tegy

2.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

3.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)

4.

Cu

sto

me

rO

rien

tation

5.

Sen

seof

Urg

en

cy

6.

Com

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

7.

Co

st

Orien

tation

8.

Com

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t9

.D

ecis

ion

Ma

kin

g&

Exe

cu

tion

Eff

icie

ncy

10

.S

upp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

11

.C

apa

city

Utiliz

atio

n

12

.N

um

be

ro

fP

latf

orm

s

13

.N

um

be

ro

fP

rodu

ct

Life

-C

ycle

s

14

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

15

.P

ers

onne

lM

otiva

tion

16

.R

&D

and

Te

chn

olo

gy

Inno

vatio

n

17

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

NISSAN - 2004

PROTON - 2006

PRIORIY FOCUSAREAS FOR ACTION


PROTON REVIVAL STRATEGY CANVAS(VALUE-CURVES)

3. Level of Debt (Profit Orientation)

6. Compartmentalization (Lack of CrossFunctional Teams)

10. Supplier “Keiretsu” (Number ofSuppliers)

12. Number of Platforms

1. Clarity of Vision & Strategy

2. Clarity of Mission Objectives

4. Customer Orientation

5. Sense of Urgency

7. Cost Orientation

9. Decision Making & Execution Efficiency

11. Capacity Utilization

14. Manufacturing System Capability

15. Personnel Motivation

16. R&D and Technology Innovation

17. Sales, Marketing & Distribution Efficiency

8. Communication Transparency &Engagement

13. Number of Product Life-Cycles

18. Reach of Global Markets

19. Strategic Alliance

ELIMINATE RAISE

REDUCE CREATE


PROTON’S FUTURE REVIVAL IF IT WERETO EMULATE NISSAN’S HISTORIC REVIVAL

1.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)2

.C

om

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

3.

Supp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

4.

Num

be

ro

fP

latf

orm

5.

Cla

rity

of

Vis

ion

and

Str

ate

gy

6.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

7.

Cu

sto

me

rO

rien

tation

8.

Sen

seof

Urg

en

cy

En

ga

gem

en

t

9.

Co

st

Orien

tation

10

.D

ecis

ion

Ma

kin

gand

Exe

cu

tion

Eff

icie

ncy

11

.C

apa

city

Utiliz

atio

n

12

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

13

.P

ers

onne

lM

otiva

tion

14

.R

&D

&T

ech

nolo

gy

Inno

vatio

n

15

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

16

.C

om

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t17

.N

um

be

ro

fP

rodu

ct

Life

-Cyc

les

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

PRIORIY FOCUSAREAS FOR ACTION

ELIMINATE

REDUCE

RAISE

CREATE

“TO-BE”

lessons learnt from nissans historic revival

Education