Lessons Learnt From Nissans Historic Revival

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Lessons Learnt From Nissans Historic Revival

  1. 1. “SHIFT” LESSONS LEARNT FROM NISSAN’S HISTORIC REVIVAL Page 1 5th JANUARY 2007 © DKD
  2. 2. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan Personal Glimpse 1. Grandfather, Bichara Ghosn, a Maronite Christian (eastern Catholic) , emigrated from Lebanon to Brazil. He worked hard an eventually owned 3 businesses, agricultural products trading, rubber and air transport operation. He had eight children, 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 the Sisters of Besancon, guardians of the Catholic faith and French culture in Lebanon. They had 2 children, Carlos and Claudine. 3. Carlos was educated at the Collège Notre-Dame until high school in Lebanon. In Paris, attended the Lycèe Saint-Louis in preparation 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 Manager of 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 1989 he left for Michelin USA as the CEO. 5. Joined Renault in October 1996 as executive Vice-President in charge of purchasing, research, engineering and development 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 francs per 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 the followings: 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 Motor Show in 1999: A return to profitability by 2000, achieve profit margin in excess of 4.5% and a 50% reduction in debt by 2002. 9. Subsequently developed the Nissan 180 and the Nissan 3-3-3 for growth. Page 2 5th JANUARY 2007 © DKD
  3. 3. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan Personal Development Insights 1. At Michelin Paris, went though a rigorous 3 months PS – personnel service – training at Michelin where employees attended a series of lectures whilst at the same time were given real life problems to solve that actually arose in the company. After the completion of PS, went through another phase of training related to personal specialty. He chose manufacturing as he believed that’s where everything happens – you have to know the product, the people who made it and 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, we had to cut necessary investments to the minimum, reduce our inventories, shorten our customers’ terms of payment, and sell 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 are managing a business, you can’t use your imagination when it comes to costs. You have to be precise about your debts and your expenses”. 4. Relationship with Headquarters, “Functional relations are important; nonetheless, the head office had to respect the autonomy of the local operation team. This kind of balance is difficult to achieve. If there’s little autonomy, you can’t control anything, because you don’t know who’s responsible for what. You wind up stripping the whole system of responsibility”. • “Even the best organizational ideas are worth nothing if they aren’t communicated and supported clearly, with a thoroughly 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”. Page 3 5th JANUARY 2007 © DKD
  4. 4. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan At Renault 1. An automobile is the object of both reason and emotion. Automobile manufacturers are architects more than anything else. They work with people across a vast range of trades and professions. There are multiple challenges, your situation is characterized by permanent uncertainty. At a given time, you may attain that level of mastery, but you can never be certain that it will last. That’s why changes in management are very risky even though they’re often indispensable. 2. Difficulty at Renault: Organized into completely separate departments, like silos  Implement cross-functionality. 1. Employee morale - failure in North America, AMC; failed projected merger with Volvo  Speed in execution, 2. integrated company with strong personality. Maintain good employee relations whilst achieving high productivity at the same time. “Our Cars are too Expensive”  The 20 Billion Plan, cutting costs from 9,000 to 10,000 francs per car for 3 years. 3. Communication, particularly bad news  Prepare the ground, put all the facts out in the open. 4. Low productivity  Benchmark Nissan Sunderland Plant, UK. 5. “Small” size  Search for an alliance. 6. 3. “Any alliance, whatever its terms, costs a great deal of effort”. Whether a partner is big or little, a merger offers the same orders 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 two product 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 billion in a containership and sinking it in the middle of the ocean. Page 4 5th JANUARY 2007 © DKD
  5. 5. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan 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 industrial process, 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 to create 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, the rest 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 was capable 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 to have 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, give the company a project, deliver the impetus to carry it out. 8. In summary, what Nissan need is FIRE, INTENSITY and LIGHT. Page 5 5th JANUARY 2007 © DKD
  6. 6. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan Assembling A Team 1. Between March and July 1999, extensive analysis made on Nissan to determine which areas would require which personnel. 2. Renault’s team consist of: Engineering - credibility in Engineering & Technology, Finance – ensuring a well managed treasury (Investments, Purchases, Cash-flow Management, FOREX, Consumer Credit, Raw Material Trade, Expenses etc.), Communication, Human Resource, and others totaling 30 in all. • Enthusiastic about going to Japan.. Competent, enthusiastic, open-minded people Competent, enthusiastic, open-minded people • Open-minded. capable of engaging in aa real dialogue! capable of engaging in real dialogue! • 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 the inside. • “We are not missionaries! We’ve come here not to change Japan but to straighten Nissan with the men and women 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 the company, and we are here to help them.” 4. A bridge-building approach, founded on reason but on emotion as well, basically oriented toward objective performance and toward restructuring the company. “We’re doing this not to satisfy Renault, We’re doing this as it would create more wealth 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 reinforcement to the people who contribute to the effort”. Page 6 5th JANUARY 2007 © DKD
  7. 7. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan 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 net operating profit after taxes, the results posted by the different subsidiaries, and the various segments of the market. The overview wasn't exactly dazzling! Te company’s deterioration was obvious, but I had no idea abut the real cause of destruction. 2. I suspected management problems, strategic problems, problems involving imprecision and lack of coordination, but I didn’t have a clearer idea than that. I spent most of spring 1999 examining Nissan from every angle: Inside & outside Japan, in offices, factories, and technical centers; in conversations with suppliers, dealers, and customers. I asked people what they thought was going right, what they thought was going wrong, and what they would suggest to make things better. I accumulated documents that contained very precise assessments of the different situations we had to deal 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 the company’s forecasts were ridiculous. • Nissan’s New Union Organization had the facto joint management. However, the Union’s remarks were,”As long as we believe that you’re acting constructively and taking our remarks and observations into account, we won’t do anything 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 had no 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 was to 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 understand what’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 of Nissan’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. Page 7 5th JANUARY 2007 © DKD
  8. 8. HIGH MID LOW © DKD 1. Clarity of Vision & Strategy 2. Clarity of Mission Objectives 3. Level of Debt (Profit Orientation) 4. Customer Orientation 5. Sense of Urgency 6. Compartmentalization Before the NRP (Lack of Cross NISSAN – 1999, March Functional Teams) 7. Cost Orientation 8. Communication Transparency & Engagement 9. Decision Making & Execution Efficiency NISSAN’S SITUATION IN 1999 10. Supplier “Keiretsu” (Number of Suppliers) 5th JANUARY 2007 11. Capacity Utilization 12. Number of Platforms 13. Number of Product Life- Cycles 14. Manufacturing System Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global SOURCE: SHIFT Markets Carlos Ghosn – Jan 2005 Inside Nissan’s Historic Revival 19. Strategic Alliance Page 8
  9. 9. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan 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 have to 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 those who would be charged with carrying out the plan. Imposing changes from the Top-Down would immutably fail. The idea was to tear down the walls, whether visible or invisible. Nine cross-functional teams that would cover the entire spectrum of 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 optimization 7. 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 had sub-teams or cells, each with ten members as well. What were the Test the company’s Establish Goals What were the Test the company’s Establish Goals Move and execute MEASURE Move and execute opportunities that willingness to developed from MEASURE opportunities that willingness to developed from quickly. quickly. each function accept often radical Objective Data, each function accept often radical Objective Data, Not to get caught in Not to get caught in WHY? had identified for measures that Cross-functional WHY? had identified for measures that Cross-functional the quicksand of the quicksand of itself or that had overturned team’s estimates itself or that had overturned team’s estimates “Japanese “Japanese been mentioned established between ambition been mentioned established between ambition Consensus” Consensus” by other sectors. practices and realism by other sectors. practices and realism ACTIVE CONSENSUS STRATEGIC DIRECTION CURRENT ISSUES TARGETS & DEADLINES 5% of the WORK 95% of the WORK Page 9 5th © DKD JANUARY 2007
  10. 10. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan Shock Therapy October 18th, 1999 at the Tokyo Motor-Show, presentation of the Nissan Revival Plan (NRP), till then unprecedented in 1. Japan, a “picture” of the revival plan complete with numbers, curves, graphs and texts utilizing huge screens. CURRENT SITUATION PROBLEMS DIAGNOSIS ACCOMPLISHMENTS 1. Nissan’s share in the global market has 1. Nissan’s share in the global market has 1. Has established a significant been in continuous decline from 6.6% in 1. Has established a significant been in continuous decline from 6.6% in 1. Failure to concentrate on profit making. international presence and deployed on 1991 to 4,9% in 1999. 1. Failure to concentrate on profit making. international presence and deployed on 1991 to 4,9% in 1999. 2. Neglect on its customers. a Global scale. 2. Annual production has fallen by 600,000 2. Neglect on its customers. a Global scale. 2. Annual production has fallen by 600,000 3. Weakness in cross-functional works. 2. Has developed a world-class production vehicles. 3. Weakness in cross-functional works. 2. Has developed a world-class production vehicles. 4. General absence of the sense of system. 3. Difficulty in maintaining profitability since 4. General absence of the sense of system. 3. Difficulty in maintaining profitability since urgency. 3. In crucial areas, Nissan is on the cutting- 1991. FY Mar’00, record loss of ¥ 684 urgency. 3. In crucial areas, Nissan is on the cutting- 1991. FY Mar’00, record loss of ¥ 684 5. Lack of a common long-term vision. edge of technology. Billion ~ US$ 6 Billion. 5. Lack of a common long-term vision. edge of technology. Billion ~ US$ 6 Billion. 6. Poor brand image. 4. Nissan has formed an alliance with 4. Net debt burden ~ ¥ 1,400 Billion ~ US$ 6. Poor brand image. 4. Nissan has formed an alliance with 4. Net debt burden ~ ¥ 1,400 Billion ~ US$ Renault. 12.6 Billion. Renault. 12.6 Billion. 2. Approach to the NRP – “As you know, in the automobile business, there’s no problem at a car company that good products can’t solve.” NRP (Nissan’s Revival Plan) 1. Our aim is to reduce our purchase costs by 20% in the course of the next three years. 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 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. 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. 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 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. 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 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. 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. 6. Our forecast for FY 2000 will mean the elimination of 21,000 jobs, except R&D which will add 500 positions. The Plan – Very precise, extremely factual, and highly quantified, in relation to the performance to be achieved as relation well as to the deadlines set. The Plan left little room for interpretation. interpretation. THE SHOCK OF MY ANNOUNCEMENT WAS PART OF NISSAN’S THERAPHY SUMMARY of the Return to profitability by Profit margin in excess of A 50% reduction in the SUMMARY of the Return to profitability by Profit margin in excess of A 50% reduction in the NRP 2000. 4.5% of sales by FY 2002. current level of debt. NRP 2000. 4.5% of sales by FY 2002. current level of debt. Page 10 5th JANUARY 2007 © DKD
  11. 11. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan You have to COM-MU-NI-CATE 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 the one 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 and goals. 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,quot; If we reach our 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 public to decide what that image is, and it’s up to us to observe the evolution of our brand image in the eyes of the general public. Page 11 5th JANUARY 2007 © DKD
  12. 12. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan DESIGN, DEVELOP, FINANCE and SELL 1. The success of the Alliance would depend heavily on Renault’s and Nissan’s ability to preserve and reinforce their respective brand identities. In automotive industry, more than any other industry, the brand mage is a function of product design. 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 the head of product planning. 2. We had to find a design head who could symbolize Nissan’s revival, someone who had worked outside the company, someone with sufficient self-confidence and an international vision  Shiro Nakamura from Isuzu was hired. 2. Nissan’s financial management had to be revamped. Companies in the automotive business are great consumers of capital. An assembly plant capable of of producing 250,000 vehicles annually costs more than a billion dollars. The development of an entirely new model costs several hundred million dollars. All Nissan’s financial functions, which had been delegated to the various subsidiaries, to be centralized in Tokyo. One of the goals was the repatriation of all Nissan’s debts to Japan, reducing the heavy financial charges in USA, Mexico and SEA. The spirit of responsibility and transparency has caught on well. Headquarters is responsible for finalizing and deciding strategy, for policy in regard to products and brand image, and for the choice of the top managers. But once the budgets are fixed, they’re the ones who are responsible. 3. The number of Nissan subsidiary dealerships was reduced through consolidation or outright sales. The goal is to have a network imbued with the entrepreneurial spirit – raising the bar in terms of performance and brand image, dealing with unresolved difficulties, creating a system of quick reaction to problems. Progress is measured not only by how much our market share increase and how solidly the network returns to profitability, but also consumer satisfaction index and by customers’ 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 advertising campaign and a good flow of information. That’s what the sellers want: a project, a strategy, product planning that makes sense. Page 12 5th JANUARY 2007 © DKD
  13. 13. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan A NEW CULTURE 1. Although our initial intention wasn’t to change Nissan’s culture, the fact is that the company’s culture is constantly evolving. We wanted to make change for the sake of performance. We change only those elements that are linked to Nissan’s problems. 2. What was important wasn’t resolving all the dysfunctions of the company; it was detecting the most crucial ones and dealing with them. When a company has been winning over a long period of time, it’s the result of a strategy and of a certain 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 a sufficient 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 dealing with today’s challenges. You have to take the ones with the most potential and send them where the action is – “they’ve faced difficult tasks and accomplished them”. 6. Employees remuneration would be tied to company’s performance via rewards or incentives. The idea of fairness is tilted more towards performance, and moving away from focusing on efforts to focusing on results. Page 13 5th JANUARY 2007 © DKD
  14. 14. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan MAKING THE ALLIANCE LIVE 1. We’re entering a century that’s going to be increasingly marked by globalization, it’s a fact! However, besides this openness to globalization, there’s the desire on the part of people to maintain a sense of national identity. Globalization and respect for national identity must go hand In hand. But, before long, only regional or local companies will be able to define 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 whole world, 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 is making progress because it respects individual and cultural identities. It can’t be accomplished passively. It’s deliberate and active. Preserving one’s identity implies a certain level of self-affirmation in dealing with others, but exchanging with others 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 of Nissan. 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 are truly 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 has been remodeled, its capital relationship reinforced, and the integration of its functions (purchasing, information technologies) 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.” Page 14 5th JANUARY 2007 © DKD
  15. 15. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan MANAGING FOR SUCCESS 1. Management model is not set in stone. It’s something you develop step by step. You test the model, and you adjust or alter it according to circumstances. My notion of management is that you start from facts and move towards theory, not vice versa. The most important phase in the development of the Nissan Revival Plan, the aspect that cost the most time and effort, was the analytical phase, listening to people and observing conditions on the ground. Exchanges are very important. In management, knowledge about situations is of prime importance, i.e. situational knowledge that combines all 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 existing conditions 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 may be”. The first social responsibility of a CEO is to be the leader of the company, making certain that the vision of the company and of its future is known, understood, and shared by everyone. He must make certain that there’s a relatively simple, 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 net automotive debt for FY 2003 – 2005. 2. Strategy defined in simple terms: More revenue, competitive costs, higher quality, more speed, a stronger Alliance with 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 necessary part of the company. Along with this, I have to be careful to share the fruits of progress so that the people who work for the 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 them in 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 else make the most appropriate decision”. Page 15 5th JANUARY 2007 © DKD
  16. 16. HIGH MID LOW © DKD 1. Clarity of Vision & Strategy 2. Clarity of Mission Objectives 3. Level of Debt (Profit Orientation) 4. Customer Orientation 5. Sense of Urgency 6. Compartmentalization Before the NRP (Lack of Cross NISSAN – 2002, March After the NRP NISSAN – 1999, March Functional Teams) 7. Cost Orientation 8. Communication Transparency & Engagement 9. Decision Making & Execution Efficiency NISSAN’S SITUATION IN 2002 10. Supplier “Keiretsu” (Number of Suppliers) 5th JANUARY 2007 11. Capacity Utilization 12. Number of Platforms 13. Number of Product Life- Cycles 14. Manufacturing System Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global SOURCE: SHIFT Markets Carlos Ghosn – Jan 2005 Inside Nissan’s Historic Revival 19. Strategic Alliance Page 16
  17. 17. Carlos Ghosn “Le Cost Killer” Excerpts from SHIFT The Historic Revival of Nissan TOMORROW 1. The question of a carmaker’s future can be posed in relatively simple terms: “DOES IT HAVE BOTH A COMPETITIVE PRODUCT 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 for more than 2/3rd of worldwide production, and the top 10 companies account for more than 90%. However, different players 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 well as 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 seductive capacity, 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. The automobile has an aesthetic dimension, it’s a symbol of independence, it grants status, it affirms the personality of its owner. 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 the manufacturer’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 scale advantages – 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 yet there's only one culture.. Page 17 5th JANUARY 2007 © DKD
  18. 18. END Page 18 5th JANUARY 2007 © DKD
  19. 19. HIGH MID LOW © DKD 1. Clarity of Vision & Strategy 2. Clarity of Mission Objectives 3. Level of Debt (Profit Orientation) 4. Customer Orientation 5. Sense of Urgency 1999 SITUATION 6. Compartmentalization NISSAN - 1997 (Lack of Cross Functional Teams) 7. Cost Orientation 8. Communication Transparency & Engagement 9. Decision Making & Execution Efficiency 10. Supplier “Keiretsu” (Number of Suppliers) 5th JANUARY 2007 11. Capacity Utilization 12. Number of Platforms 13. Number of Product Life- Cycles PROTON - 2006 PROTON’S 2006 SITUATION VS. NISSAN’S 14. Manufacturing System Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global SOURCE: SHIFT Markets Carlos Ghosn – Jan 2005 Inside Nissan’s Historic Revival 19. Strategic Alliance Page 19
  20. 20. HIGH MID LOW © DKD 1. Clarity of Vision & Strategy 2. Clarity of Mission Objectives PROTON - 2006 3. Level of Debt (Profit Orientation) 4. Customer Orientation NISSAN - 2004 5. Sense of Urgency 6. Compartmentalization (Lack of Cross Functional Teams) 7. Cost Orientation 8. Communication Transparency & Engagement 9. Decision Making & Execution Efficiency 10. Supplier “Keiretsu” (Number of Suppliers) 5th JANUARY 2007 11. Capacity Utilization 12. Number of Platforms 13. Number of Product Life- PROTON’S FUTURE REVIVAL IF IT WERE Cycles 14. Manufacturing System TO EMULATE NISSAN’S HISTORIC REVIVAL Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global Markets PRIORIY FOCUS 19. Strategic Alliance AREAS FOR ACTION Page 20
  21. 21. PROTON REVIVAL STRATEGY CANVAS (VALUE-CURVES) RAISE ELIMINATE 1. Clarity of Vision & Strategy 3. Level of Debt (Profit Orientation) 2. Clarity of Mission Objectives 6. Compartmentalization (Lack of Cross 4. Customer Orientation Functional Teams) 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 CREATE REDUCE 10. Supplier “Keiretsu” (Number of 8. Communication Transparency & Suppliers) Engagement 13. Number of Product Life-Cycles 12. Number of Platforms 18. Reach of Global Markets 19. Strategic Alliance Page 21 5th JANUARY 2007 © DKD
  22. 22. HIGH MID LOW © DKD 1. Level of Debt (Profit Orientation) 2. Compartmentalization (Lack of Cross RAISE “TO-BE” CREATE REDUCE Functional Teams) ELIMINATE 3. Supplier “Keiretsu” (Number of Suppliers) 4. Number of Platform 5. Clarity of Vision and Strategy 6. Clarity of Mission Objectives 7. Customer Orientation 8. Sense of Urgency Engagement 9. Cost Orientation 10. Decision Making and Execution Efficiency 5th JANUARY 2007 11. Capacity Utilization 12. Manufacturing System Capability 13. Personnel Motivation PROTON’S FUTURE REVIVAL IF IT WERE 14. R&D & Technology TO EMULATE NISSAN’S HISTORIC REVIVAL Innovation 15. Sales, Marketing & Distribution Efficiency 16. Communication Transparency & Engagement 17. Number of Product Life -Cycles 18. Reach of Global Markets PRIORIY FOCUS 19. Strategic Alliance AREAS FOR ACTION Page 22

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