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Nissan: Back from the Brink
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| Rebuilding Nissan from the outside-in |
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| Updated |
Mar 17, 2005 19:41:50 |
| Rating |
 40 ( -6 -15% ) | | Author | Chuck Schifsky |
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Description:
Anyone who has seen the new for-2003 Nissan 350Z might consider it a good-looking car, maybe even beautiful. Drive one and you'll probably agree that it's one of the best new sports cars to come along in years. However, to the employees and stockholders of Nissan, the 350Z represents much more. These people view the 287-horsepower road rocket the same as they do the company itself-attractive, nimble, and for the first time in years, a true performer.
While some may think that designing and building the next Z car was an easy process, it wouldn't have been possible just a few short years ago. In the late 1990s, Nissan was perched at death's door; drowning in debt and about to join other once mighty car companies that are now out of business. Few expected the company to survive, and the idea that it would ever have the money to develop another Z car was almost incomprehensible. In the post 9/11 economy, we've gotten used to daily reports of large companies filing for bankruptcy or undergoing major restructuring just to stay in business. However, when Nissan's then Chief Operating Officer Carlos Ghosn detailed his plan for saving Nissan at the Tokyo Motor Show in late 1999, the business pages were instead filled with tales of dot com successes and happier times. We weren't used to hearing such doom and gloom, especially from such an established company.
Ghosn came to Nissan early in 1999 from French car company Renault following Renault's sizable investment in Nissan. This alliance would benefit both companies thanks to savings in purchasing, product strategy and research. However, before anyone would reap a bountiful harvest from this merger, Ghosn needed to save Nissan from extinction. This would prove to be no easy feat. At the time, the company was $18 billion in debt, market share was dropping rapidly and seven of the previous eight years had ended in red ink.
Nissan Revivial
"We had an aging model line, an ailing brand, we were heavily invested in companies that had no impact on promoting our automotive business, and we had a complex system of vendor relationships that didn't foster competition", Ghosn said in a speech earlier this year. Besides lacking what he calls a "clear profit orientation", Ghosn labeled Nissan as having "no vision, no credible strategy, and no shared mid-and long-term plans". However, one of his biggest gripes was one that few automotive insiders would argue with. He said the company had an "insufficient focus on customers and too much focus on chasing competitors"-an obvious shot at Nissan's efforts to emulate Toyota and Honda's successful, yet somewhat sterile product lineups. While he was at it, Ghosn threw in the ultimate jab that anyone could give a car company that often take years to bring new vehicles to market when he said Nissan lacked a "sense of urgency". He had now laid down the gauntlet.
In his massive "Nissan Revival" reorganization plan, Ghosn recommended slashing thousands of jobs, closing plants and radically revising supplier agreements. "We said that there were no sacred cows, no constraints and no taboos," Ghosn said. However, while he was cutting costs, Ghosn also wanted Nissan to build new cars, trucks and SUVs that buyers would yearn for. This was the wildest part of the strategy due to the fact that cars can cost millions if not billions of dollars to develop.
"We wanted a plan for long term profitable growth, cost cutting and expanding at the same time", he said. "We made three commitments. The first one was to return to profitability for the first year, which was fiscal year 2000. The second was to achieve an operating profit greater than 4.5% of sales by the end of the plan, which is fiscal year 2002. The third was even though we were going to invest more money, we would be decreasing the debt by 50% by the end of the final year of the plan (2002)."
The true measure of the success of Ghosn's plan would be if Nissan could cut costs while developing cars like the 350Z at the same time. Few analysts gave him much chance of keeping Nissan, a worldwide company that operates in 192 countries, out of bankruptcy, much less making it profitable.
"Interest and skepticism were high when I announced and explained how the Nissan Revival plan would return the company to profit within one year and achieve long term profitable growth", Ghosn said. "After all, I was considered an outsider-a Brazilian-born Frenchman placed in a traditional Japanese company for only three months. My personal past performance in other contexts was a very slim, small tie to credibility."
Even though Ghosn was trying to fix Nissan from the outside in, he was determined to make his plan work-at any cost. "We said that if any of these three commitments were not achieved, the president of the company and the members of the executive committee would resign… We had one bullet in our gun and we were committing ourselves and our responsibilities to make sure that the target would be hit."
Back from the Depths
Today, Ghosn serves as Nissan's president and chief executive officer. He steered the company back from the depths of unprofitability in less than the three years he said it would take. However, this success has come with sacrifices-both for the company and its workers. Ghosn presided over cuts that included reducing worldwide headcount by 21,000 and closing five Japanese plants. He cut the number of Nissan suppliers in half and asked the remaining vendors to reduce their costs by 20%. He also sold more than $5 billion in assets, some of them representing historic ties with Nissan. The balance sheet now shows that profits are up, with margins surpassing the 4.5% target. Debt has decreased to around $3 billion. But, one of the best effects is that the company is now able to react quicker to ever-changing buyer desires thanks to the leaner, more efficient infrastructure. But, Ghosn isn't stopping there.
"We wanted to make sure that the first decade of the twenty-first century will be at a 180-degree turn from the last one-with increasing profitability or top-level of profitability in the industry, erasing the debt and increasing market share," Ghosn said, explaining the reasoning behind Nissan 180, the follow-up plan to the Nissan Revival. "Each digit of Nissan 180 has its specific meaning. The first digit, 1, means an additional one million units of vehicle sales on an annual basis in fiscal year 2004 compared to fiscal year 2001. The second number, 8, means operation margin of 8%, which would position Nissan at the top rank of global automakers. The last number, 0, means zero net automotive debt in order to have the flexibility to make investment decisions based solely on their return."
What does all of this mean for you? Well, at a time when car companies including behemoths like Ford and small fries like Isuzu are struggling to find their footing in the post 9/11 economy, Nissan is not only one of the most profitable car companies, but is poised on the edge of product greatness as well. While Ghosn doesn't dictate what kind of cars will be built in each market, his plans have paved the way for Nissan to build vehicles that people want to own and drive each day. This is especially true here in the U.S. where Nissan North America's senior vice president, sales and marketing Jed Connelly and his team have already introduced some winning vehicles and have many more to come.
While this may sound like a sales pitch for Nissan, one need only need look back at the 1999 Nissan model lineup to see how far the company has come. The 1999 Sentra was missing the spark the previous generation's spiced up SE-R model provided. While the Maxima had won Motor Trend's Import Car of Year contest when it was redesigned for the 1995 model year, by 1999 it was ready for a re-do. Altima had fallen behind competitive cars and was way overdue for a serious makeover. Frontier, while a worthy small pickup, lacked a four-door version and a good powertrain. Pathfinder, Nissan's lone SUV offering in 1999, was a holdover from its last restyle in 1996. Believe or not, the shining star was the Quest minivan-all new for 1999. At a time when SUVs and pickups were beginning to take over the world, Nissan's hopes lie with 3 bland cars, the woefully underpowered Pathfinder, a pickup too small to tow anything larger than a two-man row boat, and an all new minivan when minivans were falling off the desirable list. No full-size truck. No large SUV to compete with the Chevrolet Tahoe and Ford Expedition. No affordable SUV and no sports car.
Nissan's turnaround started with the arrival of three new vehicles for the 2000 model year including the all-new fifth-generation Maxima and Frontier Crew Cab. However, it was the Nissan Xterra that really lit the sales fire in the U.S. The mid-size SUV broke new ground not in mechanical areas, but in attitude. Nissan combined a simple body on frame construction, rugged styling and hose-it-out interior. Toss in a liberal dose of ads showing cool people using the Xterra while playing outdoors and a price well under $20,000, and you've got one hot seller. However, to give credit where it's due, these vehicles were already in the works when Ghosn arrived on the scene. But, his plan surely motivated the staff to make them the best they could be, while marketing them properly.
Model year 2001 saw the introduction of an all-new Sentra; while the Frontier received a supercharger atop the 3.3-liter V-6 improving it's hauling abilities. 2002 brought the performance-minded Sentra SE-R model back to life. While these three were worthy, the real star of the 2002 Nissan lineup was the completely redesigned Altima-the car so radically changed from its previous generation that many felt Nissan should have changed its name. Almost the size of the Maxima inside and out, the Altima now features aggressive styling, sporty handling and an optional 240-horsepower 3.5-liter DOHC V6. Our only complaint is that the interior looks, feels and sounds cheap. To prove that Ghosn's plan is working, Nissan listened to buyers of 2002 Altimas and made at least 11 minor interior modifications to 2003 cars including simple fixes such as changing the liner material in the center console bin to reduce noise.
350Z and Murano
Two of Nissan's missing links hit showrooms this Fall with the introduction of the Murano and the return of the mighty Z car. The Murano is a crossover SUV built on the same platform as the Altima-the first car-based SUV for Nissan. It features a standard 245-horsepower 3.5-liter DOHC V6, continuously variable transmission, and is available with either front wheel or all wheel drive. Pricing will start at just under $29,000.
Filling the need for a Nissan sports car is the new 350Z powered by smooth-running 3.5-liter DOHC V-6. The 350Z continues in the tire tracks of the original Datsun 240Z introduced in 1970 complete with seating for two. Ghosn points out that "to be successful in the marketplace, we know that the 350Z must deliver in performance and design while keeping the price tag under $30,000". And, he adds, much to the satisfaction of buyers, "the new 350Z does just that." Look for a convertible version early next year.
Coming Up
A look into the Nissan crystal ball shows two important vehicles coming next fall as 2004 models-a full-size pickup and a large SUV. Both will be based on a new platform and will be built at Nissan's new $1.4 billion assembly plan in Canton, Mississippi. Our Nissan sources say the two will not just go head to head with established players such as Ford's F-150 pickup and Chevy's Tahoe SUV, but beat them at their own game. Also for 2004, Nissan will introduce a redesigned Maximum, an all-new Quest minivan and an updated Pathfinder.
In addition, Infiniti has benefited from the new product blitz. For 2003, Infiniti launched the 350Z-based G35 coupe and G35 sedan. The rear-wheel drive models are quite possibly the best in their respective classes. Another new rear-drive Infiniti, the M45, uses the same 340 horsepower 4.5-liter V-8 found in the larger, heavier Q45. Priced at around $43,000, the M45 is Infiniti's answer to the new E500 Mercedes-Benz. Infiniti will also get versions of the full-size pick up and SUV, probably in early 2004.
"Nissan's recovery, our revival, continues ahead of plan, fueled by an unwavering focus on products and profitability," Ghosn said of the turnaround. "We will be guided by the belief that performance is the ultimate building block of credibility." While the rest of the auto industry is suffering from the post-dot com bust, terrorism-fueled blues, Nissan appears to be marching forward. Not too bad for a company that almost didn't make it to the Y2K party. What's most important for consumers is that Ghosn's plans have effectively gotten rid of all the boring Nissan products, while working to fill dealerships with cars and (most importantly) trucks that people aspire to drive everyday. This isn't a revival; it's a revolution. |
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