Road Runner

Nissan boss Carlos Ghosn has achieved star status in Japan after taking the country’s second-largest carmaker from the edge of bankruptcy to record profits. After consistently meeting sky-high targets for the last five years, he now plans to double the firm’s Middle East market share in just nine months.

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By  David Robinson Published  January 10, 2005

Cars|~||~||~|When he took over at Nissan five years ago, Carlos Ghosn’s cost-cutting programmes were so unpopular he took to travelling with a bodyguard. But his controversial methods worked, and now, after taking Japan’s second-largest carmaker from the brink of bankruptcy to record-breaking profitability, he is preparing to take over the entire Renault empire. The Nissan president and CEO is one of the most sought-after automotive talents in the world, enjoying the kind of street credibility other car executives can only dream about. In Japan, he is feted in popular manga-style comic books, mobbed for autographs during plant tours, and heaped with national adulation for rescuing a car company once seen as beyond salvation. But none of this appears to make any difference to Ghosn himself. “You will never hear from me that I am satisfied on anything anywhere in the world. It’s not my job to say I’m satisfied,” he says. In truth, Ghosn has a lot to be satisfied about. Renault, Nissan’s controlling shareholder with a 44% stake, is rewarding him with the CEO position at the French carmaker, beginning in April, giving him dual roles. In many ways, Ghosn, born in Brazil to Lebanese parents but educated in France, is the quintessential global leader. He speaks five languages; but it’s his remarkable track record for turnarounds that’s gained him his superstar reputation. His name has even been floated as a potential candidate for president in Lebanon. “People have been gracious enough to make me a candidate in an election where I was not a candidate,” Ghosn says. He has said on Lebanese television that he is not interested in running for political office “for the time being.” But the political establishment in Lebanon would be advised to watch him carefully: Ghosn is used to getting what he wants. And the 50-year-old is known for being ruthless in his pursuits. Since 1999, when Renault paid US$5.4 billion for a controlling stake in Nissan and dispatched Ghosn to Tokyo to run it, he has set and met sales and profit targets that have stretched the carmaker to the limit. Ghosn first made his name in 1990 turning around tyre-maker Michelin’s North American division. But he was catapulted into the public eye came when he was recruited to restructure Renault in the mid-1990s. He began his task by closing the French manufacturer’s car factory in Belgium, slashing 3100 jobs. His methods earned him the nickname: “Le Cost Killer.” When Ghosn moved to Japan to save Nissan, a competitor described his mission as the equivalent of putting US$5 billion onto a container ship and sinking it into the ocean. Nissan was US$21 billion in debt and shedding market share right across the world. Six months after arriving, Le Cost Killer took his hatchet to the company, announcing the closure of five Japanese factories and 10% of the dealerships, with the loss of 21,000 jobs — 14% of the workforce. His actions led to hate mail, and hence Ghosn took to travelling with a bodyguard. Such events have garnered Ghosn plenty of notoriety, which he dismisses. “You can judge for yourself how ruthless I am,” Ghosn says, adding: “There are a lot a caricatures going around, which is normal. People don’t try to grasp you with all the subtleties, they just want to have this sticker.” All that matters, Ghosn maintains, is the direction in which the group is going. The rest, he says, is irrelevant. “If you look at company since 1999 its in much better shape than it has ever been.” As turnarounds go, the Nissan saga is in a class by itself. After joining the ailing carmaker and overhauling its structure, Ghosn took the unusual step of promising to resign if the firm failed to meet his ambitious targets (profitability in a year; an operating margin of at least 5.4%, and slashing debt to less than US$10 billion). In the end, the targets were hit a year ahead of time. Five years down the line, Ghosn has taken Nissan from near-bankruptcy to become one of the most profitable car companies in the world. Nissan’s global sales have risen more than 20% in five years; Ghosn predicts 3.6 million annual sales by the end of September 2005, compared with 2.5 million in 1999. Despite his hatchet-man reputation, Ghosn contends that real change comes by changing individuals who are already part of a company rather than hiring and firing people. “I don’t think you need to systematically change people. To be able to change a company you need to be able to change the mindset. And that’s what we’ve been doing everywhere,” he says. Ghosn was in Dubai in December to officially launch Nissan’s luxury Infiniti brand in the Middle East. He says the region’s US$2 billion luxury car market makes it one of the most important in the world today. Nissan began selling a limited number of Infiniti Q45 sedans in the Middle East in 2002, but it will now enter the market in earnest through eight dealers carrying a full range of Infiniti cars and a selection of sport utility vehicles. “We’ll be offering the product and full customer service. When you go into luxury brands you have to have both,” Ghosn says. Incentives, developed with Infiniti’s dealers in the region, include extended warranties and loan cars delivered to customers’ doorsteps when their vehicle is being serviced. Nissan’s manufacturing plans for the region are currently limited to Egypt. The automobile maker expects the first phase of the project to be operational by the summer, and plans to invest US$100 million in the scheme. The group plans to use its Egyptian base to export vehicles to African markets, especially those neighbouring countries that have an advantageous tariff agreement for automobile imports coming from Egypt. Ghosn says Nissan could develop manufacturing capacity in other parts of the region, but that depends on how much trade controls between Middle East countries open up. “Between Saudi Arabia and the United Arab Emirates there is an open market. But between Gulf countries and other countries of the Middle East, there are still a lot of barriers and problems. When you ship cars from one country to another you face many problems, and this is not very encouraging when you want to establish a plant that would be dedicated mostly to the Middle East market." Ghosn says the Middle East represents about 500,000 cars sold per year, while Nissan plants, on average, produce about 400,000 cars per year. With this in mind, he says: “You’re going to have a substantial opening of the borders for this plant to produce results.” Nissan sold 100,000 cars in the GCC in 2004, compared with 72,000 in 2001. The firm now holds about 15% of the market. Ghosn plans to increase this to 30% by September this year. The biggest car firm in the region remains Toyota, which sells more than 200,000 units annually — 40% of the GCC market. “Nissan has improved, but [its operations in the] Middle East are still below par. There are many things that we at Nissan need to do — in terms of design, in terms of engineering, in term of supplies — to support the push in the Middle Eastern market,” Ghosn says. As well as running Nissan, in April Ghosn will take over the CEO position at Renault, a US$46 billion giant in its own right. “One CEO with two hats,” is how Ghosn describes his new role. Renault and Nissan have been quietly cooperating on technology and car parts buying for years, and their collaboration is likely to expand upon Ghosn’s arrival. However, he denies that heading up both firms will lead to design similarities or a conflict of interests. “You cannot make something in common if you have two completely different teams from two completely different continents coming from two different cultures,” he emphasises. At present, Nissan and Renault sell a combined 5.4 million vehicles a year and control 9.3% of the global market. But Ghosn has far bigger ideas. Under a three-year business plan to start in April, Nissan aims to boost its global sales by 37% to 4.2 million units as it expands into untapped areas and markets. It is a huge challenge, but if anyone can deliver, Ghosn can.||**||

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