Carlos Ghosn (19) Nissan in crisis mode
The outbreak of the global recession prompted a quick rethink for the automaker
In the spring of 2008, six months before the financial markets would come crashing down, my instincts told me that the economy was about to go into a period of reassessment. But there was no clear indication, at least to those of us in the auto industry, that we were on the brink of economic collapse.
Then, on Sept. 15, we experienced the "Lehman shock," or as they call it in the U.S., the start of the Great Recession. Economic and financial systems all over the world were paralyzed. Even companies on solid financial footing were no longer able to borrow money. Automakers, too, had to face harsh realities, because we needed to move large sums of money to finance purchasing and sales, while also supporting our suppliers.
I was in Paris at the time of the crash. As soon as I heard the news, I immediately made a phone call to Nissan Motor headquarters. I told the chief operating officer, Toshiyuki Shiga, to assemble all of the executives in Ginza for an executive committee meeting. It was a holiday in Japan, but we couldn't wait to make critical decisions. In the meantime, I told the Nissan management team to create plans of action for each department -- purchasing, development, production and sales. I didn't know exactly what would happen, but we had to be prepared.
The most important consideration was cash management. Nissan had launched a medium-term plan called GT 2012, which emphasized profitability through active investment. However, since the financial system was paralyzed, we could not afford to let go of any cash. We had to refrain from investing as much as possible. We suspended the plan immediately.
Overnight, the world had changed completely. Nissan, like every other company on the planet, was forced into an unstable situation. But because of our quick action and the cooperation of Nissan employees, we were able to rebound relatively quickly. In addition to suspending our medium-term plan, we also reduced production, froze new parts orders and took other measures, such as reducing overtime. Even our corporate-sponsored baseball team suspended its activities to conserve funds. All management positions took a 5% pay cut.
I returned to Japan on Sept. 23 as planned. We held a town hall-style meeting with employees and told them that while we may need to take further cost-reduction measures, we would not compromise investments in important projects that would affect the future growth of Nissan. We had to focus not only on the short-term but also the long-term sustainability of our business.
When the economy crashes, even large companies like Nissan can become helpless. Ultimately, governments had to come to the rescue. Government agencies, government-affiliated financial institutions and central banks in various countries, led by the U.S., took measures to keep big businesses from failing by lending them money or assisting them through special programs. Compared to the U.S. and Europe, the Japanese authorities were more cautious about becoming directly involved and took time to fully analyze the situation.
I was in frequent contact with government officials, both in Japan and overseas, to exchange ideas and offer advice, based on Nissan's situation. The experience reminded me that cash is the lifeblood of the economy. We, along with other businesses, had to adjust our management philosophy completely. It was a bumpy few months, but Nissan's fighting spirit came roaring back, like a muscle memory from the early days of our revival. Whatever happened next, we would be ready.
Carlos Ghosn is chairman and CEO of Nissan Motor Co., Ltd.
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