Are Ghosn's methods built to last?

[Murrow]

Are Nissan chief’s methods built to last?

Ghosn turned around automaker, but performance beginning to slide


By Anthony Faiola
Updated: 12:25 a.m. ET Aug 3, 2006

TOKYO - Six months after the rainy March morning in 1999 when Carlos Ghosn first stepped through the glass doors of Nissan Motor Co., the man who would become known in Japan as "the destroyer" was bringing out the big guns.

His first target: keiretsu -- the traditional relationships of fixed pricing and co-ownership between Japan's major manufacturers and their chief suppliers, a system that Ghosn blamed in large part for bringing Nissan to the brink of bankruptcy. In a speech still talked about in hushed tones inside Japanese corporate circles, Ghosn shocked a gaggle of gray-haired directors of Nissan suppliers by declaring his intention to sell off stakes in their companies. On top of that, he demanded they slash prices by 20 percent or risk being cut off, according to sources familiar with the meeting.

The strategy at Nissan marked the quadrilingual, French-educated Brazilian of Lebanese decent as a forerunner in the globalization of management styles. The idea: that fierce cost-cutting, consolidation and integration can prove as quick a fix in Japan as in Brazil, France or the United States -- all sites of Ghosn corporate successes.

Ghosn -- now head of both Nissan and Renault SA -- launched talks last month with General Motors Corp. over the possible creation of the world's largest automotive alliance. Last week, he told reporters in Paris that the companies were discussing billions of dollars of potential savings ahead of an Oct. 15 deadline to conclude the talks.

But as the talks proceed and Ghosn is being hailed for his past performance, questions are also surfacing about whether his one-size-fits-all management style is built to last.

Ghosn ultimately broke through Japan's corporate ethos, shattering virtually every taboo in a country with the world's most rigidly structured business culture. Dispatched to save Nissan by Renault -- the Paris-based automaker that bought into Nissan in 1999 during a crisis as acute as the one now confronting GM -- Ghosn orchestrated what would become his fourth corporate turnaround on four continents.

"When I sat in my chair [at Nissan], I thought, 'I was here before,' " Ghosn wrote in his autobiography, "Renaissance." " 'Here' was not a place but a situation. Lack of profitability, market share problems, unclear responsibility. . . . Revival of a company means changing the way employees think and act, blending different management cultures into one."

Long-term vision?

But after five stellar years, Nissan's performance has begun to slide, leading analysts and some of Nissan's business partners to conclude that Ghosn may have focused on short-term cost-cutting at the expense of long-term vision.

http://www.msnbc.msn.com/id/14156109/

[MrMax]

Nope. You can't cut costs forever.

[mbukukanyau]

Exaclty my point

[dav305z]

Yeah that's what I've always suspected about Nissan. We really won't know until the next generation of vehicles come out. The current success resulted from designs that were largely already in place along with violent cost cutting. The real trick will be to see the cars that emerge from this slimmed down Nissan. Will quality be on par?

Even if Nissan continues to prosper, the fact remains that GM is just the wrong patient for Ghosn's brand of corporate mercianism. Too big, too unionized, to iconic. As long as Wagoner continues to make results, I think GM is better off with an inside man who can be discriminating about the cuts and who can navigate the company's dark alleys as opposed to carpet bombing them.

[GM-Joe]

They have the same problem they had six years ago, their core products are old and are now being perceived as dated. Supposedly, the Altima/Maxima are going to be new, yet to me they look the same in their own tacky way. They rushed their truck platform's as well as minivans to market, thus the quality was garbage.

[johnny smallblock]

Yet many say Ghosn's accomplishments in Japan may not be so easy for GM to emulate if an alliance is eventually reached. GM faces staggering labor costs, something Ghosn was able to deal with at Nissan in part because unions in Japan tend to be far less confrontational that their U.S. counterparts. Ghosn managed, for instance, to slash 16,000 domestic jobs at Nissan without generating one labor strike.

"The company was trying to restructure itself and it did what it needed to do to survive," said Koichiro Nishihara, president of the Federation of All Nissan and General Workers Union. "Perhaps unions elsewhere would be less understanding."

Hello?!? Wagoner cut 30K jobs with no strike. WTF?

[01cavalier]

So basically Nissan's problems have only been put back a few years it seems. If that is all this guy can do, then why would we want him to have to deal with GM's problems? Cutting costs was somethign GM always tried to do by pressuring suppliers, and spinning off other operations like Delphi. It really hasn't helped. Selling off businesses only helps short term, at least GM seems to realize that. They are making enough progress on their own.

[dreadnaught1181]

His decisions were a good short term solution to turn the company around and give it some forward momentum. This strategy has worked too but I think Ghosn has relied on cost-cutting too much and not enough on well-built, stylish products.

[asim]

Originally Posted by MrMax

Nope. You can't cut costs forever.

Hmm...makes sense. I guess you can't, they come and get you in one point of time.

[rsbaker]

Originally Posted by MrMax

Nope. You can't cut costs forever.

That is for sure.

[megeebee]

Well written.

As many of you have already written, you can't cut costs forever. And cost cutting itself is not a recipe for success. Often necessary, but it can't take the place of the 3 basic things needed to keep your business going:


1) Product

2) Product

3) Product


It also seems to me that GM has, finally, done most everything for itself that Ghosn did for Nissan.

Maybe this was all just a show that Kerkorian put on to shake things up and bring attention. Maybe it was all one big, fat red herring? If so, it has certainly worked. So much of what I hear and read in the financial press seems to say that an alliance such as what is proposed wouldn't help either company very much. Specific projects, yes. Like the 3-way with DCX and BMW to produce the RWD hybrid transmission. Or with Ford on the FWD hybrid. And Nissan/Renault might be the major benficiary of such an agreement, at least with fuel-saving technology.

[quinnp12]

I gotta say, the only even potential saving grace for Nissan now is going to be their sports cars. The skyline and 350 are their last hopes, seeing as the new Maxima, Altima, Sentra (their entire lineup) was about as fresh as the Crown Vic. They did rush them to market and cause quality issues, and they were not the Japanese company known best for quality in the first place. Like Mitsubishi, they may be heading for a slow death at this point.

[RWD60]

well, the Maxima, the first of the 2nde gen Ghosn Nissans, went from dropping sales every month to going up 10.9% in July.

and it's the least new of the new Nissans (same platform, LESS powerful engine, etc...) while the Sentra, G35, and Altima get updated platforms and better engines.

so i'd say at least give them another year to get the other three out (and the updated fullsize truck/SUV's) and the Versa some time to gain momentum. and Nissan is still making over a billion dollars a year, even with falling sales... so if they can just stop the slide, much less start growing, they'll be fine for a while.

[zaxxis]

Personally, I feel that Ghosn has gotten lucky at Nissan. He entered the company when the Z concept and Altima were well into their design cycles and when they showed signs of being a hit, the design language was mutated across all of Nissan and Infiniti.

Cost cutting is the easy part. Having the vision to lead the company and it's products is entirely different. Not to mention comparing Nissan to GM is like comparing a dollar store chain to Wal-mart.

I feel Lutz and Waggoner has the harder job because he's trying to turnaround a company that has 8x as many products, bean counters that have too much power and an internal culture that has done things the same way for 40 years.

-Z

[63GrandSport001]

Ill agree, the problem with Nissan's current product line-up is they went stale fast. When it first came out it was like wow thats different but now that the different factor is gone sales are sliding along with market share.

Carlos Ghosen IMHO over hyped, look at what has happened to both brands that he runs. He cuts costs, that is about all he knows how to do which is only short term as the comp. catches up with you.

GM has both sides of the puzzled figured out, they are cutting costs and bringing us better and better products.