Nissan's Carlos Ghosn: Steering Through Crisis, Driving Into The Future

Nissan CEO Carlos Ghosn. Via.

Carlos Ghosn has a laundry list of crises that he has faced as the President and CEO of Nissan. Recent events including the post-Lehman collapse, the March 11 earthquake and tsunami in Japan, the Thai floods and European economic turmoil have all presented huge challenges for the automaker. However, according to Ghosn, the yen’s rise is exacerbating the impact of all the other crises and is forcing even profitable companies to stop investing in Japan. Endaka--or strong yen--is affecting the long-term future of Japan and it needs fixing immediately.

“The yen is appreciating at the worst moment for the Japanese economy,” Ghosn told a packed auditorium at the Japan Society recently [full video here]. “The problem is we are making money, everywhere except Japan,” he said.

Ghosn said that the appreciation of the yen means that Japan cannot compete on cost, despite the “indisputable” quality of goods, skilled workforce and wealth of talent. “We are surrounded by countries who are making sure the exchange rate is competitive, how can we face a tsunami, a flood, a financial system collapse and on top of this have to have a re-evaluation of the currency of 35 or 50 per cent? We can’t.”

Ghosn has taken his concerns about the yen right to the top. When the Japanese Prime Minister Yoshihiko Noda visited the Nissan plant in Yokohama recently, Ghosn said he decided not to overwhelm him with a long list of problems.

“When the Prime Minister said, “What can I do for you?” I said, “One thing, fix the exchange rate.”

But Ghosn clearly subscribes to the school of what doesn’t kill you makes you stronger. Carlos Ghosn was brought in to Nissan in 1999 to save the company. And he did. He quickly implemented the Nissan Revival Plan and the carmaker returned to growth and profitability--it now ranks third behind Toyota and Honda in the U.S. car market. In 2005, he was also named CEO of Renault and the combined companies have 350,000 employees and global sales of 7.2 million units in 2010. Nissan’s latest innovation is the Leaf electric car, the market leader in 100 per cent gas free cars with about 15,000 units sold worldwide.

His prescription for crisis management starts with a clear assessment of the scale of the problem. The next step is to make a plan that selects a few priorities to get through the crisis but also maintains some longer-term projects. In Nissan’s case, after the collapse of Lehman Brothers in 2008, everything except electric car production and expansion in China was put on hold while the company concentrated on maintaining cash flow.

Ghosn also emphasized the importance of empowering the workforce to deal with adversity. “There is no way, you’re going to get through a crisis alone,” he said. “The one key which explains why we recovered faster than our competitors after the tsunami and the Thai flood is because we empower people.” Naturally for empowerment to work, top management also needs to be committed to and engaged in the plan.

Ghosn does however believe that Nissan has an “anti-crisis” weapon in the form of the electric car. Some predict that electric cars will be 10 per cent of the market by 2020. “Everybody knows I am the most optimistic,” he joked. “Which is obvious because we’re the only one with the car.”

With oil prices still at high levels despite the economic crisis in Europe and the faltering U.S. economy, he believes demand for electric cars can only increase. He also sees other uses for the technology powering electric cars. Indeed, Nissan will unveil a house at the next Tokyo Motor Show, which is powered by an electric car battery. “Batteries will get smaller and soon you’ll have a personal battery which you can use in your house, in your car or in your office,” he predicted. “There’ll be no need for a central system for power, so the evolution of the battery is extremely important for the economic development in the 21st century.”

Such innovations might have been useful in post-earthquake Japan. The country faced a shortage of power caused by the shutdown of nuclear reactors. But Ghosn said the way the Japanese people dealt with the crisis is reason to believe that Japan still has a bright future. “Inside Nissan outside Nissan I can witness the fact that Japan is a great economy and a great country because of this capacity to face challenges in way that is always very simple, straightforward and very constructive without whining.” He gave as an example the way Nissan helped reduce the demand for power in the summer months by switching the weekend to Thursday and Friday from the usual Saturday and Sunday. “There was not a protest, we just did it. This willingness to help society and help the country is a major strength.”

The resilience of the Japanese people was one of the major lessons from the March 11 crisis. And learning according to Ghosn is the final component of successful crisis management. He said that after each challenge it is vital to review the company’s response and look at the successful systems and processes used and even which people responded well and which “melted down”. It is sound advice for unpredictable times. “The only thing we know for sure about a crisis,” he said, “is there’s going to be another one.”

--Juliet Hindell


Hindell was BBC Tokyo bureau chief and Daily Telegraph Tokyo correspondent and is now based in New York. Her previous posts from Japan Society events include  The Power of Tomodachi: U.S. Military's Humanitarian Efforts Cemented An Alliance, Joichi Ito: Open Networks And Hacker Spaces Can Save The World, Lawson's Business Strategy and Response to the Quake, and Why Japan May Surprise the World: Rebirth after the Tohoku Quake.