Three years ago, Nissan was in danger of being pronounced dead. After posting losses seven years out of eight between 1991 and 1998, Japan's one-time automotive giant was US20bn in debt. International market share had fallen from nearly 7% to less than 5%. Even Japanese buyers shunned the brand. When DaimlerChrysler turned its back on a deal to rescue the company, it seemed the end was nigh for one of the world's great auto makers.
Today, if not quite out of intensive care, the company is at least off life-support. Full recovery will take several years but Nissan is once again breathing and functioning on its own.
Carlos Ghosn
Well, almost on its own. French car maker Renault bought 36,8% of Nissan in 1999 for $5,1bn. It was a deal that suited both companies: Nissan because it could have collapsed otherwise , and Renault because, in an era of international motor industry consolidation, it needed a high-volume global partner with access to new markets. Without the deal, Renault itself could have become a takeover target.
Under Carlos Ghosn, Nissan's recovery has been extraordinary. Brazilian-born Ghosn (his name rhymes with phone) had previously played important roles in the turnarounds of Renault and French tyre maker Michelin.
He quickly identified five key weaknesses at Nissan: no common long-term plan; lack of urgency; no clear profit strategy; no co-ordination between divisions; and not enough focus on customers.
Oh, and Nissan's products were boring. Shiro Nakamura, who has been brought in from Isuzu to head Nissan's design teams, says: "Nissan used to be strong in design. But that changed. The character was lost. Some of our cars were boring."
While Ghosn worked to restructure and cut fat from within Nissan, he acknowledged that, ultimately, it would be the desirability of the company's vehicles that would make or break the company. "There is no problem at a car company that good products can't fix," he told the FM in an interview.
Ghosn's three-year Nissan Revival Plan took effect in 2000. The overriding aims were to halve debt and achieve operating profits equal to 4,5% of sales - both by March 2003. This would be achieved through cutting costs, increasing market share and capitalising on the international alliance with Renault, which owns over 40% of Nissan. If the two companies could co-ordinate purchasing of components and raw materials, and rationalise product plans through common platforms and engines, Ghosn estimated annual savings of $3bn.
There was plenty of scope to cut costs elsewhere. Nissan had shareholdings in 1 394 companies. Ghosn saw only four as indispensable. There were also holdings in land and securities. Most of those have been sold. Japanese vehicle manufacturing capacity has been cut by 30% through the closure of car and engine assembly plants. Those that remain are working at 80% capacity instead of just over 50%. Worldwide, 20 000 jobs have been shed.
The result: Nissan has achieved its debt reduction and profit targets a year ahead of schedule.
In February Ghosn announced the Revival Plan was being replaced by the next three-year stage in the recovery process: Nissan 180. The name refers to three goals for March 2005: to grow annual sales by 1m, reach 8% operating profit and eliminate debt.
As Ghosn notes, savings so far have been achieved with vehicle ranges in place before rationalisation and platform-sharing with Renault.
"This means that a much greater number of cars to come will be designed and engineered with a significantly lower cost base and will benefit from higher economies of scale because of common platforms and components, reduction of complexity, and particularly from expected sales unit growth."
Profitable car manufacture has been a rarity at Nissan for some years. So dysfunctional was the company that "we launched vehicles we knew wouldn't make money", says a Nissan official. Nissan's definition of profit is consolidated operating profit over the life of a vehicle. In 1999, only four out of 43 vehicles were profitable; in 2000 it was 11 from 40, and in 2001, 18 from 38. This year, the plan is for two-thirds of vehicles to make money.
It's not as easy as it sounds. Patrick Pelata, Nissan's vice-president responsible for product planning, explains that Nissan's brand image has slipped in recent years, to the point where prices have had to be discounted against rivals. In the US, Nissans were priced down $1 000 against direct competitors, and in Europe by euro700.
Work on brand-building has been going on for two years, but there's a lot still to be done, he says. Though there are signs that the image and price gap is closing, there is no miracle cure. The plan is to halve the price differential by 2004 and close it by 2009.
"We are starting to move out of others' shadow," he says. "People here have been without a future for several years. They were going from recovery plan to recovery plan. Now they know where they are going. Belonging to this company has become good again."