Carlos Ghosn

In 1999, Nissan was paralyzed by bureaucratic inertia. It took a non-Japanese to whip the automaker into shape.

The basic problem facing Nissan North America in 1999 when Carlos Ghosn arrived was the same one facing Nissan of Japan: The company was thinking too small.

“There was not enough ambition in the company, on either side,” Ghosn recalls today from his Tokyo office. “I thought neither our Japanese executives nor our American executives understood.”

Dispatched by Renault Chairman Louis Schweitzer to represent the automaker's new 36.8 percent ownership interest, Ghosn wasted no time putting a fire under the ailing Japanese automaker. At the time, Nissan's management — a creature of Japanese business culture — was unable to jettison many affiliated suppliers and lay off employees.

For the United States, Ghosn informed management that Nissan's 3.5 percent share made no sense and was unacceptable.

“I told them: "Look, I'm not going to play in the second league. I want Nissan to play in the first league,' “ Ghosn, now 54, recalls. “ "It may take years to do this, but I'm never going to accept a second-tier role for Nissan.'

“I looked at our competitors. And there was no reason that Nissan was half the size of Toyota or Honda in the United States. We have the best engineers and enough resources, and we could do more exciting vehicles than they could.”

50-50

Clearly, Ghosn had his challenge cut out for him. And privately he gave himself only a 50-50 chance of reviving Nissan.

Long dependent on North America for volume and profit, Nissan was in a downward spiral by 1999. The automaker had racked up $22 billion in debt. Tokyo's complicated operating losses were depleting its war chest for new product initiatives elsewhere. And its lack of initiatives was translating into more operating losses.

U.S. market opportunities such as minivans and workhorse pickup trucks were being lost. Beckoning segments, such as car-based SUVs, were being ignored. Talent was being squandered. A brand image once associated with affordable sportiness and technology was being squandered on ho-hum fleet sales.

U.S. sales fell to 622,434 in 1999, a decline of more than 150,000 since 1994. And sales fell even though Nissan Division was outspending Toyota, Honda, Mazda, Hyundai, Kia, Mitsubishi, Suzuki and Subaru on a per-vehicle basis in advertising.

Typical of the problem was the Altima. In the 1990s, the U.S. market called for a roomy family sedan from Nissan to compete with the big-selling Toyota Camry and Honda Accord.

Instead, recalls Norio Matsumura, a senior executive with Nissan's overseas operations in the "90s, because of cost concerns, U.S. dealers would have to make do with the narrower vehicle chassis being used for the Japanese market Bluebird sedan. The regrettable compromise made the U.S. Altima “a failure compared to Accord and Camry,” Matsumura says.

“Nissan in the "90s,” he says, “had difficulty investing.”

No time to lose

Ghosn did not have that difficulty.

The multilingual, multicultural, Brazil-born executive spoke in precise and clipped English and prescribed strong medicine. He closed unproductive factories in Japan, laid off thousands of workers, sold unprofitable supplier holdings and channeled the proceeds into expansion in North America, where the market was booming.

Just a year into his role, Ghosn committed to a billion-dollar manufacturing project that would make Nissan the first Japanese company to build full-sized pickups. The Canton, Miss., plant additionally gave both Nissan and Infiniti dealers a full-sized SUV and re-established Nissan in the minivan market, where Honda and Toyota were gaining U.S. dominance.

Ghosn committed nearly $1 billion more to creating a Mexican small-car production center that would supply the region with Sentras and the new Versa. An additional $500 million went to creating a diverse American engine operation and moving the Pathfinder and Maxima to Nissan's Smyrna, Tenn., assembly lines. To keep up with the expanding portfolio, he boosted North American engineering and research activity outside Detroit.

Hopeless?

Eight years later, Nissan and Infiniti have cracked 1 million U.S. sales for two years running. The U.S. company now delivers almost two-thirds of Nissan's global profits, Ghosn says. And in the first quarter of 2008, the company had doubled its 2000 market share. “The opportunity to revive Nissan was considered to be a hopeless case,” Ghosn reveals. “But because it was hopeless, it made it a more exciting opportunity.”

You can reach Lindsay Chappell at lchappell@crain.com.