Carlos Ghosn's title of COO at Nissan Motor Co. might as well stand for Castor Oil Officer. On Oct. 18, he prescribed dire medicine for the money-losing carmaker: Close five plants; eliminate 21,000 jobs; cut the supplier base in half; cut costs by ¥1 trillion, or $9.5 billion; and more.
The prescription was not limited to cuts. Nissan will add 500 staffers in its research and development operations as it continues to roll out new models.
Ghosn assumed the new job in June, as part of Renault SA's purchase of a controlling stake in Nissan. Asia Editor James B. Treece met Ghosn at Nissan's Tokyo headquarters on Oct. 26 to discuss how Nissan will follow through with its medicine.
Will Nissan have the money for all the new products you plan?
Having money is not a problem today. Nissan is not anymore in a situation of being strapped in terms of cash. We have credit lines available.
But the whole revival plan is really about cutting resources and shifting resources from areas where resources are not necessary or are not related to the core business or strategic businesses, and putting those resources behind what is the essence of our activity, which is new products and product development.
Can you be more specific?
Maybe a couple of figures can summarize this: Today, Nissan investment is on a trend of 3.7 percent of sales, which is not sufficient to prepare for the future. So we decided immediately to allow investments up to 5 percent.
That begins immediately?
Yes. But obviously, it is not a simple budget figure. It's not 'We need to spend.' It is a function of the merits of the different proposals. We will go from approximately ¥250 billion ($2.4 billion) investment figures presently to something above ¥300 billion ($2.9 billion) immediately. It's an increase in quantity, but at the same time it's an increase in quality because we will dedicate a much bigger part of our investments to new products vs. investing in affiliate companies or shareholdings or capacity, or other elements like that.
So resources, we think, will not be a problem.
Will the 500 people you plan to add in r&d all be based in Japan, or overseas as well?
We said that r&d will be managed globally. That means that the people who are in r&d that you post in the United States will be part of the global NTC (Nissan Technical Center) and will be empowered to be totally in charge of the products sold in the United States, not only the products that they have developed for the United States.
There was a tendency to feel responsible only for what you had directly developed. If there was any problem on the other products, you would say, 'Well, this was Tokyo. It is not us.'
This is finished. Management of the NRD (Nissan Research and Development) facility in the United States, for example - this is true for Europe, too - will be totally in charge. If there is any problem or something they don't like, with products developed in Japan, they will have to make sure that modifications are taking place in Tokyo so our American customers are satisfied.
The 500 people to be added are not exclusively in Japan. They will be added to our capacity around the globe, but I will let the head of our r&d decide where he thinks these new people will serve.
Do you expect the North American market to get Nissan's new CVT (continuously variable transmission)? It saves fuel, but Americans don't care about saving fuel.
The CVT is not only about saving fuel. It gives a high level of satisfaction to customers, especially to customers of luxury cars. You have a better response to changing gears; you have better acceleration; you have more smoothness when you pass from one shift to another.
We think that even if fuel consumption is not yet a big concern in the U.S., the quality of the feel and the response of the car will certainly be something very agreeable to our customers in the U.S.
But as you know, we're not going to push products on the U.S. market. We try to promote products, then let our marketing and sales organization worldwide, in common with the dealers, decide what sort of product that market wants or is able to appreciate.
We have had in the past too much tendency to push products on the market.
It (the CVT) will not be pushed on the United States, but it will be available for the United States.
Does the reduction in the number of your suppliers necessarily mean Nissan will move to modularization?
Not necessarily. But as a consequence, it will move to modularization.
The right modularization, when it is done well, is done with a spirit to give more effectiveness, more competitiveness to the car manufacturer.
If through modularization the car manufacturer cannot size the amount of cost that he can save and the amount of quality, he would not move to modularization.
So I think that modularization is one way to eliminate the amount of waste in the process and give better quality, higher reliability, much more commitment to everything that corresponds to customer expectation and satisfaction.
Nissan will bring 1,000 staffers back from dealerships to the parent company and, at the same time, will reduce the group's head count. If there are not enough voluntary early retirements and reductions through spinoffs, will there be layoffs?
I don't think so.
We have a high turnover today within the company. That is good news and bad news.
It's bad news because if people turn very quickly inside the company, it means there is a high level of dissatisfaction and anxiety. It is good news because it allows you to reduce head count without having to go to more difficult or more bitter solutions.
I don't think we'll need anything other than the measures that we announced: natural attrition, part-time, flex-time. We'll have a lot of spinoffs, too.
How can you call a 5.5 percent production increase by fiscal 2002 conservative when the economy is still so weak?
Because the economy in Japan has been in recession for such a long time. You know these things never last forever.
We already are seeing a rebound in the Asian economies. We see it in Thailand. The increase of the activity in Thailand is significant. We see it month after month.
Obviously, we have no certainties on this, but you need to foresee the future to commit with the most probable scenario. And our most probable scenario is stagnation or decrease for the next three years for the U.S. market and European market, and increase in the Asian and Japanese markets.
Do you worry about a rise in unemployment? Besides Nissan, NTT, Pioneer, several department stores and other companies have announced head-count reductions. That cannot encourage consumer confidence.
It's true that some people will feel like orphans of the Nissan revival plan because they say, 'Maybe the future of Nissan is going to be done without me.'
But at the same time, you need to take into consideration the fact that you're bringing hope and, in a certain way, eliminating or reducing the level of anxiety for all the others.
My eyes are mainly on the 127,000 jobs that will exist in Nissan in 2002, to make sure that those people will have secure jobs and will be acting in the company with confidence and trust into the future.