Earl Hesterberg

At critical moment, Hesterberg stood up to Japanese

In 1992, Nissan was poised to launch its first serious effort to compete with the Honda Accord and Toyota Camry.

Earl Hesterberg, head of Nissan Division in the United States, was certain that Nissan was about to blow it.

He picked a fight with Nissan executives in Japan. Tempers flared on both sides of the Pacific. Nissan executives in Japan struggled with an unprecedented affront to their management culture.

But eventually, Hesterberg prevailed. The confrontation signaled to Japan's No. 2 automaker that to grow globally, it must learn to value the voices of its foreign managers.

Hesterberg had risen rapidly through the ranks at Nissan. Recruited from Ford Motor Co. in 1981 to manage the parts and accessories department of what then was known as Datsun, Hesterberg combined street smarts, retailer rapport and an MBA in marketing into a powerful company asset. In little more than a decade, he had become vice president of Nissan Division.

The first problem with the new car was its name. After spending big on a project to replace its dowdy, too-small Stanza with a respectable sedan to take on the Accord and Camry, Nissan in Japan had decided that the new model would be called ... the Stanza.

“Nissan just wasn't a player in the mid-sized sedan market,” says Hesterberg, who today is CEO of the publicly traded retail chain Group 1 Automotive Inc. “We finally had a chance coming up, and my concern was that we weren't thinking it through correctly.

“Everything I knew about marketing told me that it was a huge mistake to keep the old name. The whole idea was to break with what we had been known for in the past.”

At a large executive meeting at Nissan's Gardena, Calif., sales headquarters, Hesterberg appealed to his boss, Tom Mignanelli, to use his power as president of Nissan's U.S. subsidiary. He wanted Mignanelli to rule that the U.S. company would not use the name Stanza.

Nissan's Japanese managers were horrified by Hesterberg's effrontery. The plan already had been ironed out in Tokyo. Tempers flared and the debate grew louder.

“They went ballistic,” Hesterberg recalls. “You just don't do this in Japanese culture. You don't go back and change your mind after a plan has been worked out.

“But they were wrong. They had made a mistake without our input.”

Mignanelli sided with his American division head, much to the consternation of the Japanese managers. After the meeting, Mignanelli sternly told Hesterberg he'd better justify the management rupture by coming up with a better name for the car.

Hesterberg called on Nissan's U.S. planning department for the solution: the Altima.

The next problem was pricing. Japan had the car priced wrong, Hesterberg concluded. It couldn't arrive with the same price as the entrenched Accord and Camry. Instead, he proposed underpricing the Altima by $800 at its introduction, then raising the price in steps over 18 months.

If the name rejection had caused trouble, Hesterberg's disregard for Tokyo's pricing decisions caused an eruption. In a scathing personal attack, a senior Japanese executive slammed Hesterberg's impudence and ignorance.

“He went on for a while,” Hesterberg remembers of the scolding. “But in the end, Mignanelli backed me up on it. We ended up pricing the Altima as I recommended, and we never regretted it. The car did very well.”

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