Driver of growth hits bumpy road
Sunday, 5 August 2007
A year ago, Carlos Ghosn looked to be at the top of his managerial game. Renault's and Nissan's chief executive had riveted the car industry with a proposal to add General Motors as the Franco-Japanese alliance's third partner. GM later rebuffed the offer but the audacious move cemented Mr Ghosn's reputation as one of the sector's boldest leaders.
In an industry with some of the world's toughest competition and most punishing cost structures, he was meeting ambitious earnings targets at both Renault and Nissan by seeking out synergies at the alliance.
Today, though, the 53-year-old is quietly hunkering down to business at his two companies amid signs that some of his glamour has gone.
Last month he withheld his bonus and those of other top managers at Nissan after the Japanese carmaker reported its first earnings drop in seven years. Nissan missed its numbers after rising petrol prices hurt sales of its profitable trucks and sport utility vehicles in the US. Cutting back on a punishing schedule that involves his shuttling between Paris, Tokyo and the alliance's far-flung overseas operations, in April he stepped down as the head of Nissan's North American unit.
In spite of increasing overseas sales and some promising model launches, Renault is showing strains, too. It met its earnings target for the first half of this year but global sales dropped by almost 4.0 per cent, led by a 9.0 per cent decline in Europe where it sells about two-thirds of its vehicles.
Air-Ghosn's managerial style of demanding the utmost from staff in ambitious three-year plans has also been questioned in France after three suicides over the past year at the carmaker's technical centre in Guyancourt, near Paris. President Nicolas Sarkozy has expressed concerns over the deaths as well other workplace suicides, including at PSA Peugeot Citroën, the rival French carmaker.
Mr Ghosn now calls the stumble at Nissan "a disappointment" but points out that Nissan, which reported a net income of more than Y460bn ($3.9bn), last year, is still "extremely profitable". Its operating margin of 7.4 per cent is indeed well above the industry average.
"The first time you make a profit warning, it's always painful," he says in an interview in Renault's head office in Paris. "But at the same time, business is business and you move on very quickly." Nor has he abandoned the idea of adding one of America's three domestic carmakers as an alliance partner.
"Fundamentally I still think that expanding the alliance is a good strategy," he says.
Mr Ghosn laughs and shakes his head when asked about hostile questioning he reportedly faced at the Japanese company's recent general meeting. Local media nusreported the grilling, which was confined, he says, to "one professional shareholder". He was then re-elected to another two-year term by an overwhelming vote, which "nobody mentioned", he adds.
Asked about the suicides at Guyancourt, Mr Ghosn outlines changes Renault has introduced to make sure that it supports staff with heavy workloads. "When you have a suicide, it's something you always have to take very seriously and try to analyse what went on," he says.
However, he adds: "I don't think we're doing anything inside Renault that is extraordinary, beyond the capability of our people."
Renault has transferred 150 people to help with the workload, named a dedicated team responsible for working conditions and stepped up coaching of its managers. "If you want a company to give the best of itself, you need to stretch it," he says. "It doesn't mean that every individual goes to the limit."
The same might be said of Mr Ghosn, who some industry analysts and competing executives say is overstretched. In Japan he was nicknamed "Seven-Eleven" for his dawn-to-night work schedule during the early days at Nissan.
"If I were running two independent companies with no synergies, it would be too much," he continues. "These two companies have a lot in common [and] that's why I'm here." Handing control of Nissan's US operations to a Japanese colleague, he says, had been planned since he took the top job at Renault in 2005; he stayed on to oversee a product offensive and the unit headquarters' move from California to Tennessee. "It's not that I was overstretched," he says.
However, Mr Ghosn says the two companies' management structure will "change and evolve, depending on the performance of the company". Nissan currently has no chief financial officer and Renault no chief operating officer, arrangements that add to his workload.
It is testimony to Mr Ghosn's hard-driving approach that some competitors appear to have cribbed from it when drafting their own restructuring templates. Peugeot's Christian Streiff drew up his own three-year plan to restore the carmaker's profitability after taking over in February. Much as Mr Ghosn did at Renault and Nissan, he set up cross-functional teams to span organisational splits and set targets on cost savings, quality, models and profitability.
Mr Ghosn's story has been told and retold, helped by his exotic background -- he was born in Brazil of Lebanese parents -- and impressive record. Louis Schweitzer, his predecessor at Renault, recruited him in 1996 from Michelin where he had gained a name for boosting efficiency across functions at the tyremaker's European, US and Brazilian operations. At Renault he introduced a cost-saving plan and was tapped to turn round Nissan when the alliance was formed in 1999.
"Being as objective as possible under the circumstances, I thought that, if I were in Louis Schweitzer's place, I'd have chosen me too," he wrote -- perhaps facetiously -- in his 2005 book, Shift.
Some detractors claim that he owes much of his success to ideas pioneered on Mr Schweitzer's watch: the alliance itself and the Logan, Renault's successful global low-cost car whose surging sales in emerging markets are helping to offset the company's sliding west European sales. Confronted with this claim, Mr Ghosn has "no challenge", he says. "I never claim credit for ideas -- I claim credit for achievements.
All eyes will be on his delivery on Commitment 2009, the three-year plan. Key to its fortunes is a rejuvenated fleet. Renault is launching new models of the Twingo city car and Laguna midsized car this year. A revamped Mégane -- its most profitable vehicle -- is expected next year.
Renault remains on schedule to meet Mr Ghosn's target of a 6.0 per cent operating margin by 2009. In a business where many producers are losing money or making barely 3.0 per cent margins, he cannot be faulted for ambition. He acknowledges this: "If you're going to make a commitment that's conservative, you shouldn't make it. That's the way to reach the performance and the potential of a company."
Under syndication arrangement with FE
In an industry with some of the world's toughest competition and most punishing cost structures, he was meeting ambitious earnings targets at both Renault and Nissan by seeking out synergies at the alliance.
Today, though, the 53-year-old is quietly hunkering down to business at his two companies amid signs that some of his glamour has gone.
Last month he withheld his bonus and those of other top managers at Nissan after the Japanese carmaker reported its first earnings drop in seven years. Nissan missed its numbers after rising petrol prices hurt sales of its profitable trucks and sport utility vehicles in the US. Cutting back on a punishing schedule that involves his shuttling between Paris, Tokyo and the alliance's far-flung overseas operations, in April he stepped down as the head of Nissan's North American unit.
In spite of increasing overseas sales and some promising model launches, Renault is showing strains, too. It met its earnings target for the first half of this year but global sales dropped by almost 4.0 per cent, led by a 9.0 per cent decline in Europe where it sells about two-thirds of its vehicles.
Air-Ghosn's managerial style of demanding the utmost from staff in ambitious three-year plans has also been questioned in France after three suicides over the past year at the carmaker's technical centre in Guyancourt, near Paris. President Nicolas Sarkozy has expressed concerns over the deaths as well other workplace suicides, including at PSA Peugeot Citroën, the rival French carmaker.
Mr Ghosn now calls the stumble at Nissan "a disappointment" but points out that Nissan, which reported a net income of more than Y460bn ($3.9bn), last year, is still "extremely profitable". Its operating margin of 7.4 per cent is indeed well above the industry average.
"The first time you make a profit warning, it's always painful," he says in an interview in Renault's head office in Paris. "But at the same time, business is business and you move on very quickly." Nor has he abandoned the idea of adding one of America's three domestic carmakers as an alliance partner.
"Fundamentally I still think that expanding the alliance is a good strategy," he says.
Mr Ghosn laughs and shakes his head when asked about hostile questioning he reportedly faced at the Japanese company's recent general meeting. Local media nusreported the grilling, which was confined, he says, to "one professional shareholder". He was then re-elected to another two-year term by an overwhelming vote, which "nobody mentioned", he adds.
Asked about the suicides at Guyancourt, Mr Ghosn outlines changes Renault has introduced to make sure that it supports staff with heavy workloads. "When you have a suicide, it's something you always have to take very seriously and try to analyse what went on," he says.
However, he adds: "I don't think we're doing anything inside Renault that is extraordinary, beyond the capability of our people."
Renault has transferred 150 people to help with the workload, named a dedicated team responsible for working conditions and stepped up coaching of its managers. "If you want a company to give the best of itself, you need to stretch it," he says. "It doesn't mean that every individual goes to the limit."
The same might be said of Mr Ghosn, who some industry analysts and competing executives say is overstretched. In Japan he was nicknamed "Seven-Eleven" for his dawn-to-night work schedule during the early days at Nissan.
"If I were running two independent companies with no synergies, it would be too much," he continues. "These two companies have a lot in common [and] that's why I'm here." Handing control of Nissan's US operations to a Japanese colleague, he says, had been planned since he took the top job at Renault in 2005; he stayed on to oversee a product offensive and the unit headquarters' move from California to Tennessee. "It's not that I was overstretched," he says.
However, Mr Ghosn says the two companies' management structure will "change and evolve, depending on the performance of the company". Nissan currently has no chief financial officer and Renault no chief operating officer, arrangements that add to his workload.
It is testimony to Mr Ghosn's hard-driving approach that some competitors appear to have cribbed from it when drafting their own restructuring templates. Peugeot's Christian Streiff drew up his own three-year plan to restore the carmaker's profitability after taking over in February. Much as Mr Ghosn did at Renault and Nissan, he set up cross-functional teams to span organisational splits and set targets on cost savings, quality, models and profitability.
Mr Ghosn's story has been told and retold, helped by his exotic background -- he was born in Brazil of Lebanese parents -- and impressive record. Louis Schweitzer, his predecessor at Renault, recruited him in 1996 from Michelin where he had gained a name for boosting efficiency across functions at the tyremaker's European, US and Brazilian operations. At Renault he introduced a cost-saving plan and was tapped to turn round Nissan when the alliance was formed in 1999.
"Being as objective as possible under the circumstances, I thought that, if I were in Louis Schweitzer's place, I'd have chosen me too," he wrote -- perhaps facetiously -- in his 2005 book, Shift.
Some detractors claim that he owes much of his success to ideas pioneered on Mr Schweitzer's watch: the alliance itself and the Logan, Renault's successful global low-cost car whose surging sales in emerging markets are helping to offset the company's sliding west European sales. Confronted with this claim, Mr Ghosn has "no challenge", he says. "I never claim credit for ideas -- I claim credit for achievements.
All eyes will be on his delivery on Commitment 2009, the three-year plan. Key to its fortunes is a rejuvenated fleet. Renault is launching new models of the Twingo city car and Laguna midsized car this year. A revamped Mégane -- its most profitable vehicle -- is expected next year.
Renault remains on schedule to meet Mr Ghosn's target of a 6.0 per cent operating margin by 2009. In a business where many producers are losing money or making barely 3.0 per cent margins, he cannot be faulted for ambition. He acknowledges this: "If you're going to make a commitment that's conservative, you shouldn't make it. That's the way to reach the performance and the potential of a company."
Under syndication arrangement with FE