Nissan Motor Co. said it will close three factories, shrink its work force by 14 percent and sever ties with half its suppliers as part of a radical three-year "revival plan" designed to restore the beleaguered automaker to profitability.
Carlos Ghosn--the Brazilian-born 45-year-old executive dispatched to Tokyo earlier this year as Nissan's chief operating officer by its largest shareholder, Renault SA of France--outlined an aggressive consolidation program today at a news conference during the Tokyo Motor Show.
Ghosn promised to slash operating costs more than 20 percent by 2002, wipe out half of Nissan's $12.6 billion debt and return the company to the black within two years.
For too long, Ghosn declared, as Nissan President Yoshikazu Hanawa sat grimly at his side, Japan's second-largest carmaker has slavishly copied competitors and paid too little attention to customers and profits. The result, Ghosn said bluntly, is that Nissan is in "bad shape." If the company is to be saved, he added, there must be "no sacred cows, no taboos, no constraints."
The rescue plan Ghosn described strikes at the heart of many of Japan's cherished corporate practices. For example, the new Nissan will grant senior management positions to non-Japanese and Japanese executives alike. Managers will be measured for performance, and U.S.-style bonuses and stock options will be granted to those deemed successful.
Similarly, suppliers that can't meet Nissan's tough new price and quality requirements will be abandoned and the company will seek to unload shares of hundreds of business partners in which it owns a stake.
Nissan's revival plan elicited high praise from industry analysts. "I thought it was very impressive," said Koji Endo, an auto industry analyst at Shroders Japan Ltd. "In almost every area, it exceeded market expectations."
Endo predicted that the program, announced just after the close of trading on the Tokyo exchange, would bolster Nissan's stock. Nissan's share price closed down 7 percent at 637 yen today in Tokyo, mirroring a drop in the Nikkei average of 225 stocks.
Even enthusiastic analysts, however, warned that Nissan's restructuring drive could hit a pothole if the Japanese yen retains its current strength against the dollar. The revitalization program assumes an exchange rate of 110 yen to the dollar; recently, the Japanese currency has been trading in the 105-yen range. Ghosn suggested today that each 1-yen gain in the value of the Japanese currency to the dollar shaves $100 million in profit from Nissan's bottom line.
Ghosn's plan also faces strong head winds in that demand for autos in Nissan's home market is slack, with auto sales having declined for the past 30 months in a row.
Nissan's worldwide market share has fallen to 4.9 percent, from 6.6 percent at its peak in 1991. Ghosn noted today that over the past decade, Nissan's annual production has dropped by more than 600,000 vehicles--a figure that exceeds the total annual sales of Volvo, for example.
Nissan has fared particularly poorly at home, with a market share below 20 percent, and suffers from a reputation for producing stodgy cars.
Today's announcement follows months of discussion and reassessment by executives from Nissan and Renault. In a move that would have been unthinkable here 10 years earlier, the French company acquired a 37 percent stake in the ailing Japanese car giant in May and has taken the lead in plotting Nissan's recovery. Hanawa called it a "sushi and chardonnay" partnership.
Since then, Ghosn, who speaks French, English and Portuguese fluently--but until his reassignment this year spoke nary a word of Japanese--has struggled to communicate his vision to Nissan's employees. At the close of today's meeting, however, he surprised many here by delivering--in Japanese and without notes--an impassioned appeal to Nissan's employees, asking they join the French-led effort to save their company.
The core of Nissan's restructuring program is a campaign to streamline model lines and get more production out of fewer facilities.
Currently, Nissan manufactures autos on 24 different "platforms," or basic body frames, at seven Japanese plants. By 2004, Ghosn said, Nissan aims to produce only 12 platforms at four plants.
The company plans to reduce annual production to 1.65 million vehicles in 2002, down from 2.4 million. But with more shifts and increased efficiencies at remaining plants, Ghosn said, Nissan could boost plant capacity to 82 percent, up from the 53 percent capacity it uses now.
Ghosn said he would achieve his planned personnel cuts largely through attrition and early retirements. The company hopes to reduce its worldwide work force of 148,000 by 21,000. Most of those cuts come from the ranks of dealers, administrative staff and plant workers in Japan, but Ghosn did say that Nissan plans to close corporate offices in Washington and New York.
CAPTION: Nissan's Carlos Ghosn in Tokyo yesterday.
CAPTION: An assembly line at Nissan's Kyushu plant in western Japan. Under the restructuring plan, Nissan would close four of its plants, including this one.