Feared 'Cost Killer' who became a corporate hero

Carlos Ghosn tells a story about his first day as chief operating officer of Nissan Motor.

Two and a half years ago, when Mr Ghosn arrived at Nissan's Tokyo headquarters, the Japanese carmaker was in crisis. It faced a Y1,400bn debt mountain, operating losses of Y60bn and massive over-capacity.

Earlier in 1999, the problems had forced Nissan into the arms of Renault, the French carmaker which acquired 36.8 per cent of the company and sent its top restructuring agent to sort it out. At Nissan's Ginza offices, every executive feared Mr Ghosn's mission - a Y1,000bn restructuring, 21,000 job losses and five plant closures.

When Mr Ghosn entered the elevator on his first day, it was already packed with executives. His restructuring team was waiting for him on the top floor. On the way, the elevator stopped at the 10 intervening floors. But no-one dared push past the Brazilian-born Frenchman to get out. Instead, they rode with the new chief operating officer, bowed as he left and went back down to their offices.

Since then, both Mr Ghosn and Nissan itself have been elevated - in different ways. Le Cost Killer, as he was known at Renault, has become president and chief executive at Nissan. The carmaker, in a remarkable turnaround, has closed uneconomic plants, reduced its debt by Y800bn - mainly through asset disposals - and refreshed its product portfolio with a swathe of new models.

It has reported a record return to profits, with an operating margin of 6.2 per cent, and turned Mr Ghosn into a corporate hero in Japan.

In one opinion poll, Japanese women even named him as one of top four men in the country as a potential father for their children.

Mr Ghosn himself is modest about the so-called Nissan Revival Plan. He suggests its results owe as much to internal willingness to change and abandon long-cherished Japanese practices, such as the inter-dependent Keiretsu system of suppliers, as Renault-imported management techniques.

Unveiling record first-half profits this year, he said: "At the heart of the revival process are two fundamental missions. First is to change the mindset, second is to establish a high level of trust.

"The jury is still out on the ultimate success of the revival process, but we have no apprehensions on the verdict."

Some of the restructuring at Nissan was already under way before Mr Ghosn arrived, including many of the new product plans. But industry analysts claim the former Renault executive injected a new impetus, combining innovative product launches with a clampdown on costs and capacity.

"These things are often the packaging and final touches," says John Lawson, head of automotive research at Schroder Salomon Smith Barney in London. "The difference between an ordinary and brilliant restructuring is often the packaging and - as a communicator - Mr Ghosn is without peer."

That has made him one of the most highly-regarded executives in the auto industry, and beyond.

But Mr Ghosn is not complacent. Indeed, he regards the revival plan as barely at the end of its first phase.

Nevertheless, he is preparing the ground for the second stage of a process designed to make Nissan a benchmark for the industry. The initial three-year revival plan, he says, will make way for "Plan 180" in 2003.

In an interview with the Financial Times this autumn, Mr Ghosn explained: "It implies 1m more units in 2005 compared with present levels, top of the industry [profit] margins at 8 per cent and zero debt - 180."

Given that Nissan's return on sales has risen from 1.2 per cent to 4.75 per cent in 2000, and to 6.2 per cent in the first half of the 2001 financial year, the 8 per cent target looks achievable.

Up to now, most of the debt reduction has been achieved through asset sales. But getting to zero debt will depend on improved cash flow from operations, which is moving in the right direction.

The additional unit volumes will depend on market demand and the reception to Nissan's new product. While capacity and overheads have been cut, Mr Ghosn is adamant that the company will lead the industry in product launches. "From inside Nissan there will be 13 new products next year, compared with five in 2001," he says. "We're going to have a lot of big selling product."

If Nissan achieves those targets, it will justify the rebalancing of its relationship with Renault. The two carmakers have agreed that the Japanese group will take a 15 per cent holding in the French company, while Renault will lift its existing Nissan stake to 44.4 per cent.

A new 50-50 operating company will take responsibility for all mid- to long-term planning decisions. That will allow Mr Ghosn to re-export some of his restructuring medicine to Renault, which has faltered in the past year.

In the meantime, Nissan itself expects to increase profits in Japan and North America - its main growth engines - and break even in Europe. Mr Ghosn has taken a deliberately cautious view of the future - in terms of exchange rates, demand and pricing. But he says the group is firmly on the road to recovery.

The results speak for themselves. As Mr Ghosn puts it: "Just two years after having a near death experience, Nissan is finding itself, at the mid-point of the revival plan, not far from the highest level of profitability among the global volume players in the industry."