Carlos Ghosn





Brazilian-born executive Carlos Ghosn (born 1954) has become known as one of the automobile industry's great turnaround artists. Dubbed "le cost killer" and "the destroyer" by those on the receiving end of his streamlining, he also had a more positive and more telling nickname: "Mr. Fix-It."

Ghosn's accomplishments were all the more noteworthy because they came at deeply troubled companies—Renault in France and Nissan in

Japan—that analysts had written off as also-rans and even evaluated as approaching bankruptcy. Ghosn did not just rescue these companies; he turned them into market leaders. As the first non-Japanese president of an automaker in notoriously insular Japan, he seemingly broke all the rules of doing business in that country as he planned Nissan's turnaround, but the results he obtained were so persuasive that soon he was not just tolerated but loved by the Japanese public; he even became the subject of a 160-page graphic novel at one point. By 2006, although one major potential deal had fallen through, Ghosn (pronounced with the "gh" as in "ghost," and rhyming with "loan," with a silent "s") was being discussed as a potential savior of yet another troubled auto company, perhaps one in the United States.

Born into Immigrant Family

Carlos Ghosn was born in Porto Velho, Brazil, on March 9, 1954. His father, Jorge, worked for an airline and had a job involving lots of travel, something that would later seem very familiar to Ghosn, who has logged up to 150,000 travel miles in a single year. Ghosn's parents had immigrated from Lebanon, and when Carlos was six he and his mother returned to live there. Ghosn learned to speak four languages fluently, and he later began working on several others, including Japanese. In Lebanon Ghosn attended topflight schools run by the Jesuit Catholic order, did well, and moved to engineering school in Paris, France. As an adult Ghosn would attribute the ease with which he moved among different cultures to the global upbringing and education he had received. "I've always felt different," he observed to Christine Tierney of the Detroit News . "Because you are different, you try to integrate, and that pushes you to try to understand the environment in which you find yourself. That tends to develop one's ability to listen, to observe, to compare—qualities that are very useful in managing."

Ghosn earned two engineering degrees in Paris, the first from the Ecole Polytechnique in 1974 (a school that spawned an unusually large number of innovative European auto engineers) and the second from the Ecole des Mines de Paris in 1978. His career started unremarkably enough, as a management trainee with the French tiremaker Michelin. Soon he was managing a Michelin plant in Le Puy, France. He was promoted rapidly through the Michelin organization, rising to become head of research for the development of industrial tires by the mid-1980s. Then he was asked by Michelin to return to his Brazilian homeland and head the company's problem-ridden operations there as chief operating officer. Just over 30 years old, he was now responsible for a continent-wide manufacturing operation.

He would have had a ready excuse for failure: South American financial markets were chaotic during those years, and Brazil in particular suffered from severe inflation. But Ghosn succeeded brilliantly by overhauling the organizational structure of Michelin's South American operations, using a method that would become something of a trademark. He formed working groups consisting of people from different sections of the organization, and from different countries. French engineers met with Brazilian purchasing managers to plot the development of a new product, resulting in improvements that had been missed when each department had acted in isolation. Within two years Michelin's South American division had turned a profit.

Ghosn repeated this early success after becoming president and chief operating officer (CEO) at Michelin of North America in 1988. Newly married to his wife, Rita, and with a growing family that would eventually include four children, he added the position of chairman in 1990. In the United States, Ghosn engineered a merger with domestic tiremaker Uniroyal Goodrich that doubled the size of his division. He dealt with unionized Uniroyal Goodrich employees not by confronting them, but by convincing union representatives that flexible work rules were in the best interest of employees on the factory floor. But despite his record, there was an unofficial ceiling to Ghosn's advancement at Michelin. The business was family-owned, and its longtime head, François Michelin, had ordained his son Edouard as his eventual successor. In 1996, therefore, he agreed to talk to Louis Schweitzer, CEO of the money-losing French automaker Renault.

Slashed, Then Grew Company

Ghosn described Renault's corporate culture acidly; he was quoted as saying in Fortune that the company "put a premium on fine phrases and arcane knowledge," wasted time on "discussions about everything and nothing," and held the noncompetitive collective belief that "you can't always have high productivity and high morale at the same time." Ghosn pared unproductive fat from Renault, closing a factory in Belgium, idling some 3,300 workers, and acquiring the "cost killer" sobriquet. But he was never exclusively a ruthless economizer. Ghosn's skills lay more in effective management that speeded up new operations and thus increased sales. Renault flourished; it was 80 percent owned by the French government in 1992, but by the mid-2000s the government's share had declined to 16 percent, and Renault was the best-selling brand in Western Europe.

In 1999, realizing that he had a talented young executive as an asset, Schweitzer made a bold move: he injected $7 billion into the Japanese automaker Nissan, acquiring 44.4 percent of its stock, and sent Ghosn to Tokyo as CEO. The task facing Ghosn was daunting. Nissan was saddled with $20 billion in debt, had lost money for seven of the previous eight years, and had hit its production peak ten years before, in 1989. Ghosn himself estimated his chances of success at no better than even money. In his first year, Ghosn had to develop a restructuring plan that took continuing slow sales into account; Nissan's model line was widely viewed as having fallen behind those of rivals Toyota and Honda technologically.

Part of Nissan's problem was excess capacity, brought on by an unofficial contract-for-life arrangement that existed between Japanese auto companies and their employees. Ghosn broke with tradition by closing five factories and cutting some 21,000 jobs. He also took on the close network of relationships between auto companies and their suppliers, relationships denoted by a specific Japanese word, keiretsu. Ghosn slashed Nissan's debt by selling off the company's shares in about half of its roughly 1,100 keiretsu partners. Finally, he infused new engineering blood into the Nissan organization, hiring a top designer from rival Isuzu and bringing Renault personnel in from France. To cope with the variety of languages spoken, he instituted English as the official language for company operations and rewarded managers who learned to speak the language. "Having to speak English is very helpful, as it is not our native tongue; so we have to simplify our thoughts down to core issues," Nissan chief financial officer Thierry Moulonguet told Benjamin Fulford of Forbes . Other Westerners had held top executive positions in Japan, but when Ghosn was given the title of president at Nissan in 2000, he was the first foreigner to hold that symbolically significant post in Japan's auto industry.

The day after he was given that post, Ghosn faced a tense meeting of mostly Japanese shareholders, one of whom likened him to the armed forces occupying Japan after World War II. Ghosn was criticized for not having mastered the traditional bow common in Japanese business circles. Ghosn responded unflappably, with a recital of the financial figures and quantifiable business trends that always formed the nucleus of his discussions in meetings. Nearly bankrupt before he came, Nissan would, he said, return to profitability within the year. The company was ahead of schedule in meeting Ghosn's goal of cutting costs by 20 percent, and Nissan had 22 new models, with eyecatching designs, in the pipeline and ready for display at the 2001 Detroit Auto Show.

Touted as Presidential Candidate

In 2003 Ghosn announced a second and equally ambitious three-year plan, known as Nissan 180. His goals were to increase Nissan's worldwide sales by one million vehicles, reduce debt to zero, and achieve an 8 percent level of operating profit. By 2005, again ahead of schedule, the last two goals and been met and the third was well on the way. Ghosn's popularity in Japan skyrocketed after his rocky start. Japanese women named him the country's most desirable husband in one poll (he remained happily married) and a comic book was issued featuring him as its hero. In his troubled second homeland of Lebanon, Ghosn was mentioned as a possible presidential candidate.

Many of Nissan's sales gains came in the United States, where even Ghosn's missteps somehow turned into positive developments. A new Nissan plant, opened in Canton, Mississippi, to manufacture the redesigned Qwest minivan, ran into trouble due to its inexperienced workforce and dropped Nissan toward the bottom of U.S. new car reliability rankings. But Ghosn won plaudits in the automotive press after accepting responsibility for the problems, calling the situation a management error rather than blaming the workers, and sending a task force of 1,000 engineers to Mississippi to address the problems. Other Nissan models, such as a redesigned Altima compact and the luxury Infiniti line, were registering sharp gains at the same time.

The plan had been for Ghosn to take over the CEO position at Renault after Schweitzer's retirement in 2005, but instead he decided to attempt something much more challenging, and indeed virtually unprecedented in the corporate world: he stayed on as co-chairman at Nissan while taking the positions of president and CEO at Renault. Fortune noted that "It's as if [professional football coach] Bill Belichick decided to add the [San Francisco] 49ers to his duties as coach of the New England Patriots." Ghosn, shuttling between Paris and Tokyo on his executive jet, with frequent side trips to the United States and other world markets, barely broke his stride. He was not especially known as a technical innovator; indeed, Nissan lagged behind Toyota and Honda in the hot new hybrid engine technology. He was, simply, one of the most efficient managers in the world. "He's just the most disciplined man I've ever worked with," U.S. Nissan marketing chief Steve Wilhite told Dutch Mandel of Automotive News , who noted that "Once [Ghosn] has digested a problem, he is like the anaconda that swallowed a goat—everyone else is watching what he has just done, but he is moving on to the next meal. Ghosn has no problem making decisions quickly and decisively."

With the record he had amassed, it was perhaps inevitable that Ghosn would be recruited by General Motors or Ford, the Big Two of the American auto industry and each beset with many of the same problems Ghosn had solved at Renault and Nissan. After rumors that he was being wooed by Ford family patriarch Bill Ford Jr., news emerged in 2006 that General Motors, under pressure from prominent shareholder Kirk Kerkorian, was exploring a series of joint operations with Nissan. Speculation was widespread that Kerkorian hoped to install Ghosn as president of GM, the world's largest automaker (and world's largest corporation of any kind). After a 90-day review, negotiations between the two firms fell apart in the summer of 2006. Nevertheless, Ghosn refused to rule out a future partnership with an American automaker, and it was still an open question as to where the remarkable career trajectory of Carlos Ghosn would finally take him.

Books

Ghosn, Carlos, Shift: Inside Nissan's Historic Revival , Doubleday, 2005.

Magee, David, Turnaround: How Carlos Ghosn Rescued Nissan , Collins, 2003.

Periodicals

Automotive News , September 20, 2004; January 31, 2005; July 17, 2006; September 25, 2006.

Economist , February 26, 2005.

Forbes , October 2, 2000; July 22, 2002.

Forbes Global , May 22, 2006.

Fortune , July 21, 2003; March 7, 2005; April 4, 2005; December 11, 2006.

Time , May 19, 2003; March 27, 2006; August 28, 2006.

Online

"Nissan CEO: The Making of a Superstar," Detroit News , http://www.detnews.com/2005/autosinsider/0502/27/A01-101491.htm (December 12, 2006).



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