Task 2. Nissan Case

Instructions: read the case and answer the questions! Submit ONLY questions with your answers; do not submit whole case otherwise task will not be accepted! Do not copy case sentences and paragraphs! Put it in your own words! Group the relevant answers by points!

Carlos Ghosn Shakes Up Nissan

In 1999, Japanese carmaker Nissan was in big trouble: Its performance was rapidly declining. No longer profitable, its debt had soared to over $19 billion, and its market share both at home and in the vital U.S. market was dropping fast. In decline, it welcomed an offer by Renault, the French carmaker, to buy a controlling interest in its operations for $5.4 billion and to pump in money to turn around its performance. Nissan immediately dispatched Carlos Ghosn, an expert in managing turnarounds, to take control of the company. Ghosn had fixed Michelins U.S. division by ruthless cost cutting. He was then recruited as Renaults COO to turn around that company and cut $4 billion in annual expenses. Now he was poised to do the same at Nissan.

Ghosn was one of the first non-Japanese CEOs of a major Japanese company. His appointment generated considerable resistance from Nissans Japanese managers, who did not want a foreigner in charge, especially one who seemed likely to shake up the company. Ghosn quickly saw that the problem was that Nissan used 24 different car platforms to produce its cars, which required it to operate with too many expensive factories. Ghosn knew that to reduce costs it would be necessary to close down five factories and eliminate a dozen car platforms to wipe out $5 billion in operating costs. However, this was Japan, where lifetime employment is still widespread, and such a move would shock the companys employees. So operating in great secrecy to push his restructuring through, he waited to tell Nissans board of directors about his plant-closing plans until the night before his public announcement. He also told them that if they did not back his decision, he would close down seven factories instead.

The stunned Japanese gave in, but a public outcry took place in Japan as a foreign CEO proposed to break long-held Japanese norms. Ghosn was forced to travel with a bodyguard as he went on a tour of inspection of all Nissans Japanese facilities, in part to share his views on how Nissan must change in the future. He made clear to Nissans employees that his strategy was not just cost cutting. He also told Nissan engineers and managers that he was going to change Nissans culture and thus the way they worked. Japanese companies are notoriously bureaucratic and hierarchical. They operate with conservative, cautious values that make subordinates reluctant to make suggestions to their superiors. Top managers are always jockeying to protect their turfhence the 24 different product platformsand change is always slow and incremental.

Ghosn destroyed these values by creating strict performance targets for managers, based on reducing costs and introducing innovative new vehicles, which could only be reached if managers reengineered the way the company worked. In particular, its engineers, designers, and other functional experts were instructed to be bold in their approach to new vehicle design and production. He created autonomous product teams empowered to make radical changes to vehicle design; he decentralized control, and the top managers who resisted were retired or moved around. Moreover, he insisted that Nissans engineers and functional experts cooperate with those from Renault, both to speed innovation and share resources and to transform Nissans values and norms. His goal quite simply was to transform the company and change the way it operated. One result is that today Nissan operates with only ten global platforms.

Ghosn succeeded. Nissan, which also owns Infinity, has introduced a whole stream of futuristic vehicles in the 2000s that have received rave reviews and resulted in soaring sales. Today, Nissan is highly profitable, and in Japan Ghosn became a famous celebrity, even a national hero. He is revered as one foreigner who could show the Japanese how things could be done better. In 2005, Ghosns success led to his appointment as the CEO of Renault. In 2011, he and the RenaultNissan board still meet once a month to make the medium- and longrange decisions presented to them by a score of cross-company teams determined to keep the company at the forefront of the ongoing changes in carmaking such as the move to more fuel efficient, safer kinds of vehicles.

Questions:

1. What kind of decisions new manager implemented? List them by points 1., 2., 3 etc.!

2. What kind of resistance did he meet?Why?

3. How changes were implemented and why?