Rebirth Of The Z

Carlos Ghosn has every reason to have that bounce in his step at the annual Detroit Auto Show this week. The Brazilian president of Japan's Nissan Motor Co., now controlled by France's Renault, has been itching to unveil the dazzling new iteration of a sports car that once defined an affordable testosterone boost. Remember the 240Z, the long-nosed rocket that every boy just had to drive after it came out in 1970, later known as the fastest-selling sports car of its time? Monday, to cacophonous music and a panoply of strobe lights in the Motor City's Cobo Hall, Ghosn was set to reintroduce the "Z" and all the verve that it once stood for.

At a time when automakers are quaking at the prospect of an economy in decline, Ghosn has an unusually bright story to tell--and he wants the Z to help tell it. It is the tale of how he and a small band of Renault executives saved one of Japan's industrial icons. In the 18 months since he arrived in Tokyo, the intense, bespectacled Ghosn has turned Nissan from a debt-ridden basket case into a profitable car company, with 22 new models in the pipeline and a truck plant under construction in Mississippi. While Ford, General Motors and Chrysler all saw sales decline last year, Nissan enjoyed an 11% increase. The company's luxury division, Infiniti, had its best U.S. sales year in history. "People were ready for this," Ghosn says with his usual rapid-fire urgency. "And we had to show quick victories to accelerate the number of people buying into our plan."

The huge Japanese automaker is by no means free of all its woes. But its dramatic turnaround is a promising lesson in global management--and perhaps a harbinger of a Japan that, despite 10 years of laggard economic performance, is capable of rising again. Indeed, while U.S. automakers are trembling at the thought of the production cuts and layoffs required to weather the oncoming economic slowdown, sales at Toyota, Honda and Mitsubishi are in overdrive, a trend that is already leading to murmurs around Detroit of a "second Japanese coming." (Stay tuned for more on that.)

When Renault bought 37% of Nissan in March 1999, analysts thought the French had flipped. Once a symbol of Japan as global industrial powerhouse, the automaker was on the verge of bankruptcy, $22 billion in debt and had a moribund sales record. As with so many other Japanese companies, Nissan had become arrogant and oblivious to changes in the market, and the old-boy network that ran the Tokyo-based company simply didn't feel like answering a new call--and certainly not one from a foreign master.

But Ghosn is a globalist--Lebanese heritage, French education, Brazilian passport--who earned his spurs as an aggressive turnaround artist at Michelin, the tire company, and then Renault. To bring Nissan to heel, the 46-year-old used psychological leverage that nobody had ever bothered to exploit in Japan. "People within the company were convinced that Nissan was sick and could die," he says. "They knew it had to change, and they were willing to help."

By October 1999, Nissan had a revival plan designed to violate most of the taboos of Japanese business; it could make Nissan competitive again. Five factories were scheduled to be shut, 21,000 jobs eliminated. In came a new compensation system that rewards merit, not seniority. And Ghosn announced a stock-option plan, something all but unheard-of in a country where bonuses have long ruled. "I doubted he could do it," says Hideki Yamano, who manages a dealership in the city of Tsu in central Japan. "But he did. It took a foreigner."

Surprisingly, the foreigner's philosophy has taken root. The company's top management ranks have little tolerance for those who resist the new order. "There is a schism," admits Akira Kaetsu, a senior manager in human resources. "We've told those who are resisting the changes that they have one year to change their attitude."

By last October, the new attitude had produced a $1.56 billion net profit, Nissan's first in seven years. The naysayers were silenced and flabbergasted. Analysts were bidding up one another's hyperbole. And in that month alone, the stock jumped 27%.

Today, far from being parodied or, worse, reviled, as many expected, Ghosn has become a symbol of promise. Salarymen mimic his wardrobe; government bureaucrats and corporate chieftains invoke "Ghosn-san" as an instant reference point in discussions about what can be done to reinvent Japanese companies. And as for the general public, Ghosn is, well, a hero. "I had never felt so moved," swooned housewife Shigeko Nakano, 52, after the authoritative lecture the bushy-browed, 160-lb. dynamo gave during a recent TV appearance. Why? "His management reforms."

Now, having moved Nissan out of danger, Ghosn faces the question of whether he and his lieutenants can restore the company's reputation as an engineering and design giant. It won't be easy. Nissan nearly foundered because its designers were forced to take orders from engineers who knew only performance and managers who knew nothing about their customers. As a result, most of the cars the company produced may have been hot under the hood, but they were tepid in the showroom. (Ever try to describe an Altima?)