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Leaders Lecture
A Transformed Nissan Faces Environmental, Industry, and Service Challenges
By Nancy DuVergne Smith , Communications Director, Center for Technology, Policy, and Industrial Development
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Nissan President and CEO Carlos Ghosn |
The Nissan Motor Company is facing challenges like the rest of the auto industry. Environmentally friendly cars cost more to build than customers are willing to pay. Only a few companies - notably Toyota , Honda, and Nissan - are profitable and this will eventually destabilize the industry. And consumers hate the experience of buying cars.
Nissan President and CEO Carlos Ghosn shared these challenges with an MIT audience at the Industry Leaders in Technology and Management lecture, Nov. 10, as well as some solutions he has built into Nissan's transformation into a profitable carmaker. The lecture entitled "A New Model in the Global Automotive Industry?" was co-sponsored by the MIT Office of Corporate Relations and the Center for Technology, Policy, and Industrial Relations.
When Ghosn, then executive vice president of the Renault Group, became Nissan CEO in 1999, he figured he had a 50-50 chance of reviving the chronically unprofitable automaker. "In the '90s, Nissan was a company on life support with $20 billion in debt. Renault decided to form an alliance, not a merger. We created something unique in the auto industry and in industry overall."
Ghosn's team put together a turnaround plan in three months based on input from young Nissan workers and it broke most of the rules of Japanese industry. They closed five plants, reduced headcount by 20,000, and dismantled traditional concepts like keiretsu, which allows a group of companies to hold equity in one another.
The alliance has offered both Renault and Nissan advantages. Both companies can move into new markets faster and with lower costs because they don't have to build new plants: Renault builds cars in Nissan's Mexico plants and Nissan uses Renault's Brazil plant and distribution networks. Both companies are collaborating on building common platforms, components, and engines allowing more flexibility in their products. Each company leads engine design in their area of expertise - Renault with diesel engines and Nissan with gasoline engines - then trade products. And the Alliance has improved purchasing power by buying for six million cars, rather than half that number.
As Nissan faces future challenges and Ghosn anticipates adding CEO and president of Renault to his titles in 2005, he says he'll rely on the strengths of two distinct work forces - French innovation in concept stages and Japanese dedication to process in manufacturing. This alliance has so far boosted the profitability, market capitalization, and sales in 192 countries for both partners.
"The alliance allows us to give our customers what they want faster and everyone wins," Ghosn said. "We are not zealots and don't pretend to be visionaries. We push synergy only if we can gain measurable improvements."
Consumers Decide on New Technologies
"'I don't buy it' is the ultimate decision on new technologies," Nissan President and CEO Carlos Ghosn told an MIT audience at the Industry Leaders in Technology Management lecture, Nov. 10. Five years into his transformation of Nissan Motor Co., Ltd., into a profitable carmaker, Ghosn said the key to building environmentally friendly cars is developing technologies that customers value. "We have to select the technologies that consumers are ready to pay for - and there are not many right now."
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