January 14, 2017 2:30 am JST
My Personal History

Carlos Ghosn (13) A whole new Nissan (almost) overnight

Saving the automaker from a sea of red took a massive effort from all involved

Nissan Motor took pains to explain its revival plan to parts suppliers.

The Nissan Revival Plan produced a range of reactions worldwide. Some worried that the plan, introduced in late 1999, would lead to the destruction of traditional Japanese business relationships. Others worried about their jobs. But I wasn't putting out a plan I didn't believe in fully. I asked for trust and backed it up by saying that if we did not return to profit after a year, I would resign, as would my executive committee.

One of the biggest changes we made was in purchasing, which caused some tense moments. Traditionally, Japanese companies form close ties with their suppliers. However, as with the Renault restructuring, we focused on reducing procurement costs by doing more business with whichever companies could best meet our requests for lower prices. It was based purely on merit. That was the only way.

For example, Nissan Motor was purchasing almost all of its sheet steel from four of the five major Japanese iron and steel companies, which was one of the main reasons our purchasing costs were so high. To remedy this, we maintained relationships with all four steelmakers but began focusing on Nippon Steel (now Nippon Steel & Sumitomo Metal) and Kawasaki Steel as our primary suppliers.

Our transactions with another steelmaker, NKK, decreased significantly, and the company announced in 2001 that it would merge with Kawasaki Steel. The media dubbed this the "Ghosn Shock." But I knew better -- long before the announcement, I had met with the top executives of NKK and personally outlined our new strategy and policies, so no one was caught off guard, let alone "shocked." 

These cost-saving measures were carried out in other segments as well. The revival plan included a target of reducing the total number of trading partners by half. At first, the number of suppliers decreased. But when Nissan's fortunes turned the corner after 2000, the number of our business partners actually rose. And as we focus on new technology, such as electric vehicles, our list of suppliers continues to grow.

We have seen this trend across the board. We had to close five plants but have since opened 15. We also had to cut 20,000 people from a workforce of around 150,000, but today we have a headcount two times the size after the initial reduction. Nissan had 2 trillion yen ($17 billion at current rates) in debt, but now has 1.5 trillion yen in cash.

I do not want to discount the sacrifice so many people made during this process. I remember seeing a story in an American newspaper at that time that featured managers of some of the small and midsize companies near Tokyo's Murayama factory, which we shut down. They told the paper that their companies would not be able to survive unless Nissan returned. But they acknowledged there wasn't a better plan -- and they wanted to cooperate, no matter what it took.

I will never forget these words. They strengthened my resolve to deliver a better future for our entire ecosystem of suppliers, partners, employees and communities.

And we did deliver it -- faster than expected. By the year through March 2002, Nissan had achieved a 4.5% margin on operations and reduced interest-bearing debt to less than 700 billion yen. We were one year ahead of schedule. As it turns out, I didn't have to quit my job. In fact, I was named chief executive officer in 2001.

Carlos Ghosn is chairman and CEO of Nissan Motor Co. Ltd.

Read more installments of My Personal History: Carlos Ghosn

See recent articles on the auto industry at Auto Industry Upheaval

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