Soundview Executive Book Summaries
Nissan's Historic Revival
In 1999, the Japanese automaker Nissan was inching closer to bankruptcy every day until Carlos Ghosn (pronounced "phone") - a Brazilian-born, French-educated son of Lebanese parents - became its chief operating officer (COO). Within a year and a half, the company was profitable once again. In only a few more years, Nissan was the world's most profitable large automobile company. In Shift, Ghosn explains how he created and implemented the Nissan Revival Plan (NRP) which is responsible for Nissan's radical transformation.
Before joining Nissan, Ghosn was an engineer who had risen through the ranks of Michelin in Brazil to become the company's COO. Next, he was hired by Renault, Nissan's parent company, as its COO. A year after joining Nissan, he was made president of that company. One year later, he assumed the position of president and CEO. In early 2005, Ghosn became the CEO of Renault while continuing as CEO of Nissan.
The Nissan Revival Plan
Shift describes the work that went into creating the NRP - a plan that consistently challenged the traditional thinking and practices of Japanese business when they inhibited the effectiveness of the company. The part of the NRP that made the biggest headlines was the elimination of 21,000 jobs from Nissan's worldwide operation, most of which were in Japan, and the closing of five factories. When Ghosn revealed the NRP, he made four announcements:
- Nissan would return to financial stability within a year of the implementation of the NRP.
- Nissan's debt would be reduced by 50 percent within three years.
- Nissan's operating margin would rise to 4.5 percent of sales within three years.
- If these commitments were not fulfilled by the stipulated dates and at the stipulated levels, the members of the executive committee, including Ghosn himself, would hand in their resignations.
It turned out that Ghosn and his team kept their jobs by keeping their commitments. The revival of the Japanese carmaker became the most extraordinary success story of the automotive world in the new century. In 2003, Nissan became the most profitable large automotive manufacturer in the world, with an operating profit margin of 11.1 percent, and began hiring again.
According to Shift co-author Philippe Riès, the credit for Nissan's success goes to Renault, which paid $5 billion in 1997 to acquire 36.8 percent of Nissan's capital stock. Its alliance agreement stipulated that three executives from Renault would form part of a 10-member board of directors. Carlos Ghosn would become the executive in charge of the company as COO. Riès writes that the shared adventure of Renault and Nissan offers a living demonstration of what globalization can accomplish when it is managed with consideration for people and respect for their individuality.
Global Adventures and Experiences
After recounting Nissan's rise from near bankruptcy to full recovery in a succinct preface, Shift continues with a complete description of Ghosn's life from childhood through his studies at the best schools in France. These early global adventures and experiences show what it takes to create an effective leader for a global company.
While Ghosn was still studying in Paris, he received a call from an executive at Michelin. Ghosn writes that he had never thought about joining a large company, but when he learned that Michelin was looking for a Brazilian engineer with a French education to work in Rio de Janeiro, and was offering a very attractive contract, he decided it was exactly right for him. While at Michelin, Ghosn came up with the principle known as "cross-manufacturing," or utilizing the same production line for the manufacture of products sold under two or more brands. He explains that this idea would serve him well in various future circumstances.
In 1996, Ghosn was approached by a headhunter who offered him a chance to become second-in-command at Renault. Knowing that he had no chance of getting to the top of the family-run Michelin, he joined Renault as COO. At Renault he would make a name for himself - le cost killer - by cutting the company's costs by more than 20 billion francs. In 1999, Renault unveiled the Renault-Nissan Alliance, and Ghosn moved from France to Japan to make the cross-cultural global alliance work.
The rest of Shift focuses on what Ghosn did to make his new job and new company an amazing success story.
Why We Like This Book
After an exciting look at the history of a modern leader who was able to have a positive impact on several global companies, Shift provides many lessons that other organizational leaders can gain from his story: Credibility rests on performance and transparency; in crisis, communication must be concentrated; make changes for the sake of performance, not for the sake of change; an alliance requires a clear definition of the rules and a good deal of attention paid to the other partner; and manage for success by starting with facts. Copyright © 2005 Soundview Executive Book Summaries
From the Publisher
“If you want to grasp how Nissan rediscovered itself, Shift is the ticket . . . The kind of company Ghosn likes to run is well presented here.” —The Boston Globe
“A trove of practical advice to executives who . . . find themselves in unfamiliar business cultures with different rules of engagement – and not much time to sort things out.”
Read an Excerpt
My grandfather, Bichara Ghosn, emigrated from Lebanon to Brazil when he was thirteen years old. He traveled alone. In those days, people left when they were still comparatively young. Going to school didn't seem so important.
At the time, the country was still part of the Ottoman Empire, which extended from Turkey to the Arabian Peninsula and the banks of the Nile. But it was an empire that was breathing its last. Distant and corrupt, Constantinople had trouble maintaining order in its far-flung provinces. There were several waves of emigration from Lebanon at the beginning of the twentieth century. The two primary reasons were conflicts based on religious differences--Druzes (a sect of Shi'a Islam) against Maronites, Sunnis against Shi'a--and endemic poverty. My grandfather came from Kesrouan, the part of Mount Lebanon that was 100% Maronite. The Maronites place a very high value on loyalty, especially loyalty to the Church, and respect for traditions. The Maronite mass has always been said in Syriac, for example. Although it's a language no one speaks anymore, it was the language Christ spoke. Maronite traditions and loyalty have been passed down from generation to generation. The Maronites who emigrated have maintained their loyalty to Lebanon and to their family members who stayed in the old country. They send money. They pay to construct a house in their ancestral village and visit it from time to time. The Lebanese Maronites are also loyal to France, which is the result of a long, nearly thousand-year-old history that goes back to the Crusades.
When you live in a world of constant menace, your close family circle is the one place where you're protected, where you can affirm your identity, which is always under threat from the Muslims, from invasions, and from the divisions between rival factions in Lebanon itself.
In the villages, the means of subsistence were limited, families were large, and land was scarce. The young had no prospects. Like so many others, my grandfather realized that he couldn't provide for himself if he stayed in Lebanon. One family member probably told him about a cousin or friend in Brazil, while another one spoke of someone he knew who'd gone to the United States and made his fortune.
"Making your fortune," of course, didn't mean becoming a millionaire; it meant finding a steady job, making enough income to begin and provide for a family, and assure the children a good education.
One fine day at the beginning of the twentieth century, my grandfather left his village, walked down the mountain, on his way to a ship in port at Beirut. After a crossing that took three months, he arrived in Rio de Janeiro, Brazil; he was nearly illiterate, he didn't have a cent, and he spoke only one language, Arabic.
Rio de Janeiro was the city where the people who'd made their money in the provinces went to take up residence and enjoy life. But the Brazilian El Dorado, at that time, was in the Amazon, in central and northwestern Brazil.
So Bichara shouldered his bag and set out for the new frontier, the territory of Guapore, near the border between Brazil and Bolivia. It later became the state of Rondonia, whose capital city, Porto Velho, lies on the Madeira River, one of the great tributaries of the Amazon River. It was there that he decided to set down his bag.
He went up and down the region, doing odd jobs. Little by little, he found his own way, started working for himself, and became an entrepreneur. At first, he bought and sold agricultural products; later, he went into the rubber trade. Hevea brasiliensis, the Brazilian rubber tree, was plentiful in those parts. Later still, he helped develop some of the Brazilian airlines that were establishing a countrywide network, acting as a local agent. He helped them to get to know the region and provided them with various services.
After many decades of hard work, in a country where he didn't know the language and started with nothing, he became the head of several companies. One of them traded in agricultural products, one of them was in the rubber business, and a third operated in air transport.
Although he is a very important person to me, I never knew my grandfather. I speak about him from hearsay, because he died relatively young at the age of fifty-three, long before I was born. He needed a gallbladder operation, and in those days, surgical resources in the Brazilian interior were primitive. He died on the operating table. But everyone who talked to me about him--my father, my uncles, and many other people who knew him--described him as a powerful personality. He was a genuine pioneer with a taste for taking risks. He had to make his way on his own when he was still very young, without money or knowledge or education. I admire him as someone who started with nothing, built himself a completely respectable life, educated his children properly, and left a decent inheritance, although quite small by today's standards.
But his inheritance bequeathed to his eight children, four boys and four girls, and his grandson was far more than his modest estate--they also inherited his example and his values.
He wasn't an ordinary man. He did some things that surprise me to this day. His contemporaries greatly respected him, and not only for his accomplishments. They admired him because he was a man of great integrity, a quality that was pretty rare in those days in the world of the pioneers. He was a man with principles and a family man; that's the way I think of him. His children were very attached to him. My father spoke of his father with a great deal of affection, as did my uncles and my aunts. He was someone who left a mark on their lives.
When my grandfather died, the family business was divided among his children. Many of them were already working for one or another of the companies. My father, Jorge, took over the businesses related to air travel.
Like most families in the Lebanese diaspora, our family maintained close ties to Lebanon. My grandfather's brothers and sisters and cousins stayed in Lebanon, as did his mother. Roughly every three years, our family returned to Lebanon.
Like many émigrés, my father went back to the old country to get married. When it's time for serious things in life, many emigres try to reaffirm the old values and traditions--especially when it comes to marriage, where family and religious values play such a large part. On one of his trips back to Lebanon, my father had obtained an introduction to a very reputable family, and that's how he met my mother. They got married in Lebanon, and she returned to Brazil with him to work and start a family themselves.
My mother, Rose, who has been called Zetta all her life, also came from a large family. They lived in the Lebanese mountains in the northern part of the country. Her father had immigrated to Nigeria, where she was born. But the schools in Nigeria were less than ideal, and so at a very young age she was sent to school in Lebanon. It was a common story. Her father stayed in Africa to work. He sent money to his family and returned to Lebanon from time to time, every two years, to spend the summer with them, before going back to Nigeria. That still happens frequently today, not only in Lebanon but also in many other countries of emigration.
Zetta attended school with the Sisters of Besaneon, one of the teaching orders that were the guardians of Catholic faith and French culture in Lebanon. For the Maronites of the Lebanon Mountains, France was something like a second home. My mother received a French education; she loves French culture and French music. For her, there's France, and then there's the rest of the world. Naturally, if you have a mother who's devoted to France, that's going to rub off on you. French culture runs deep in our family.
My mother and father took up residence in Porto Velho. It was there that my sister Claudine and I were born.
While the natural world around us was exotic, the climate was difficult. Mosquitoes, heat, humidity. Swimming in the river was out of the question. The water wasn't potable unless you boiled it before you drank it.
One day, the young girl who helped my mother around the house gave me some water that hadn't been boiled. I must have been around two. I got very sick, and I had a series of stomach disorders. The doctor told my mother, "If you want your child to have a normal life, you have to take him to a more temperate region, where daily conditions are easier and the water is healthier." My mother first took me to Rio, hoping I'd get better there. In fact, I did get a little better, but I was far from being completely cured. My father and mother decided that the only solution was for me to leave Brazil and live in Lebanon with my grandmother.
And so my family settled into a pattern typical of the Lebanese diaspora: My mother, sister, and I returned to Lebanon, while my father shuttled between Brazil and Lebanon. We lived the way a great many families do when the father goes to work in a difficult country. He earned enough money to place his family in another country, one where education is of a higher caliber and conditions are easier.
The Maronite community is one where feminine values are very strong, which obviously presents a contrast with the surrounding Arab world. The mother plays a very important role in the family and exercises a great deal of influence. There are many reasons why this is the case. It's often because the mother remains in Lebanon while the father works abroad. She becomes the authority figure. Father and mother relate to each other as equals. And considering many fathers' long absences, you can even say that the mother becomes the head of the family.
When we arrived in Beirut, I was six years old. I would remain in Lebanon until I was seventeen, finishing high school at a prestigious Jesuit institution, the College Notre-Dame.
Because my mother and father were Maronites, that is, Eastern Catholics, both of them were devout; my mother is still very observant. We lived in a traditional religious environment, but we were not fundamentalists. We're very much open to Islam and the other religions. In Lebanon, religion takes the place of cultural affiliation. There are the Druzes, the Sunnis, the Shi'a, the Maronites, the Greek Orthodox, the Armenian Catholics. Your religion is a major part of your identity. I've always had a religious consciousness. I've never felt it as a constraint but rather as a way of life.
In 1960, when we arrived in Beirut, it was a prosperous, vivacious, sunlit, charming city, beloved by tourists, as well as the financial center of the diaspora and of the other countries in the region. Lebanon was considered "the Switzerland of the Middle East." The problems caused by the strong Palestinian presence and the interference of Lebanon's neighbors, Israel and Syria, didn't begin until 1973. And the full-blown civil war--which divided Beirut in two and left barely a stone unturned in the city center--began two years after that, in 1975. I had graduated from high school four years earlier, in 1971.
My childhood was the beginning of a very stable period in my life. I went to the same school from the first grade to the last. The Jesuits played a large role in my formation. In their educational philosophy, discipline is very important, and competition equally so. There's a constant challenge, a grading system that encourages students to outdo one another. After all, the Jesuit order was the first multinational company in the world. And at the same time, the Jesuits are well known for promoting intellectual freedom.
In one class we had a professor of French literature, Father Lagrovole, a short, stout Frenchman, already aging but still very strict. He was not really a nice man--in fact, a bit haughty--but he had such a passion for French literature that we respected him very much. He would chant poetry, trying to make us hear the music. He was extraordinarily fascinating because he was so excited by what he was talking about.
He said to us, "If you find things complicated, it means you haven't understood them. Simplicity is the basis of everything." He seemed extraordinarily wise, as the priests often did. Their families were far away, they'd left their friends behind, and they lived to perform a single mission: to teach Lebanese children, or other children on the other side of the world, the French language. There was something about them that fascinated me--their devotion, their sincerity, their simplicity, their culture. I learned a lot from the Jesuits, and by the time I graduated I had a firm sense of discipline and organization, along with a taste for competition and for a job well done.
In retrospect, I was an exceptional student, but an undisciplined one. The latter trait was the despair of my mother. My mother believed a sense of duty was essential, along with levelheadedness, practicality, and discipline. As far as she was concerned, authorities were always right. When I was with the Jesuits, she was happy because I got very good grades. But at the same time, she was distraught at my rebelliousness. If I hadn't been a good student, I would have been in serious trouble.
While the Jesuits showed little pity to rowdy or mediocre students, they were much more tolerant of good students, even the rebellious ones.
So they put up with me. I did well in math and physics, but my real passions were history, geography, and languages.
One result of my family's history was that it exposed me to many languages. The first language I learned was Portuguese. By the time I arrived in Lebanon, I spoke Portuguese, a little French, and very little Arabic. At the College Notre-Dame, we studied French and Arabic. Learning languages quickly became one of my passions. The study of language is the best way of understanding the connections between peoples and cultures. Today, English is my primary means of communication, although the language most familiar to me is still French.
I graduated from high school at the age of seventeen, having passed both my French baccalauréat, a necessity for gaining entrance into the French universities, and its Lebanese equivalent. When it was time to think about a college education, I was naturally drawn to France. While the United States was a possibility, I wasn't familiar with the school system, and American universities were very expensive.
I had no idea what it was I wanted to do with my life--I had no role models around me that I could follow. But we did have one cousin who had gone on to study business at the Hautes Études Commerciales and worked in a bank in Paris. During my last year in high school, I sent him my résumé and transcripts and asked him to enroll me in a preparatory school so I could enter the HEC, too.
And so I moved to Paris.
From the Trade Paperback edition.