Are Nissan chief’s methods built to last?

There, he earned the nickname "Le Cost Killer" -- boosting Renault's results and eliminating excess capacity by closing a factory in Belgium. By the time the French automaker took the plunge into Nissan, Ghosn had risen to the No. 2 job in Paris. He was then tapped by Renault's board as Nissan's turnaround man.

The task was formidable -- by 1999, Nissan had record losses of $6.8 billion and was desperate for outside cash. Most foreign investors saw Nissan as too encumbered by Japanese corporate customs to change. Ghosn started his makeover with the basics, giving Nissan executives a crash course, in English 101.

"Ghosn issued the order that employees at corporate headquarters had to be able to speak English," said David Magee, author of "Turnaround: How Carlos Ghosn Rescued Nissan." "At times it was comical. You had the Japanese trying to communicate in bad English with the French executives who had come in from Renault. Someone would try to tell a joke and no one would laugh. At first, they couldn't even manage to make lunch plans."

But Ghosn has proven to be nothing if not pragmatic. He issued his own company English phrase book containing words like "commitment" and "targets." But he also installed simultaneous translation booths in board and conference rooms. "He wanted top management to understand his message -- every word of it," Magee said.

That message was simple: change. After emerging as one of the juggernauts of Japan's post-World War II economic transformation, the 1990s found Nissan buckling under a combination of weak management and slavish devotion to old corporate models. The cornerstone of those models was Nissan's "keiretsu" relationships with its 1,145 suppliers, including many that were majority-owned by Nissan.

Overcharged by subsidiaries
For decades, those relationships had fostered an uncanny cooperation between Nissan and its partsmakers, particularly in product design and research and development. But unlike Toyota and Honda, where the keiretsu tradition successfully merged with cultures of extreme efficiency, Nissan was dolling out fixed chunks of business to its own subsidiaries that were grossly overcharging them. Ghosn's now famous war on keiretsu -- more than halving the number of Nissan suppliers -- was an assault that many say only a foreigner could have pulled off in tradition-bound Japan.

"We were shocked -- absolutely shocked," said Kiyoshi Kawahara, chief financial officer for Yorozu Corp., long one of Nissan's main suppliers of car suspensions. "Here was Ghosn telling us that he was going to sell off Nissan's ownership in our company and at the same time, he was demanding that we lower our prices or be shut out. No one had done anything like that in Japan before."

Ghosn's approach sparked a chain reaction of cost cutting. While several of Nissan's suppliers fell into bankruptcy, others, like Yorozu, thrived by adopting Ghosn's own model of closing plants in Japan and expanding overseas. Seven years later, Yorozu is posting record profits and has broadened its customer base to include every major Japanese automaker as well as many of their foreign rivals, among them General Motors. "What was a crisis for us became an opportunity for change," Kawahara said.

Ghosn imposed a management style he had developed over two decades, forcing a company with global sales to start behaving like one. No single measure captured his style of integration and focus better than what he called his Cross Functional Teams.

In a culture where top executives tended to be CEO yes men, Ghosn identified rising stars from the ranks of middle managers, throwing members of radically different departments into one room to iron out problems. He mixed Japanese, Americans and Frenchmen on the same teams -- occasionally to dazzling effect. Such groupings helped Nissan to consolidate its banking relationships from 200 financial institutions into just 15. Within a year, Ghosn had returned Nissan to profitability.

Unlikely corporate hero
Ghosn had his detractors -- many saw him as a ruthless foreigner seeking to export Japanese jobs. But in a country then floundering in a prolonged recession and searching for new ideas, Ghosn also became Japan's unlikely corporate hero. The first foreigner to top the list of admired business leaders by Nihon Keizai Shinbum, Japan's leading business daily, Ghosn also become the subject of a popular Japanese manga comic celebrating his corporate exploits.

Yet many say Ghosn's accomplishments in Japan may not be so easy for GM to emulate if an alliance is eventually reached. GM faces staggering labor costs, something Ghosn was able to deal with at Nissan in part because unions in Japan tend to be far less confrontational that their U.S. counterparts. Ghosn managed, for instance, to slash 16,000 domestic jobs at Nissan without generating one labor strike.

"The company was trying to restructure itself and it did what it needed to do to survive," said Koichiro Nishihara, president of the Federation of All Nissan and General Workers Union. "Perhaps unions elsewhere would be less understanding."

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