Will Ghosn leave Nissan with a local? - Frontline - automotive executive Carlos Ghosn, Nissan Motor Company Ltd

Business Asia, May, 2003 by William Pesek, Jr.

It's hard to imagine Nissan Motor without Carlos Ghosn in the driver's seat. The 49-year-old chief executive has become a cult hero for morphing the near-bankrupt automaker into a highly profitable one.

That Ghosn accomplished in four years what myriad Japanese companies failed to do in 12 makes his feat all the more remarkable. In 1999, the Brazil-born Frenchman of Lebanese descent was derided as an evil foreigner destined to destroy Japan's No3 automaker. Now, Ghosn is a bona fide celebrity. He's even a comic-book hero.

Investors who have ridden the wave are dreading ghosn's departure in 2005, when he'll take charge of Renault SA, which owns 44.4 per cent of Nissan. More troubling, perhaps, is Ghosn's pledge that his successor will "definitely be a Japanese".

If a Japanese is the best person for the top job at Nissan, then great. But setting his sights on a local means Ghosn might not get the best person, just someone employees may feel more comfortable with. Shareholders may not be served by such thinking.

Ghosn succeeded by doing what others were afraid to do. He cut 23,000 jobs in a country where lifetime employment is the norm, closed factories and ended decades-old contracts to save US$6.7 billion ($10.6 billion) in purchasing costs. He also shook up the seniority-based system for promotions and raises and reduced Nissan's net debt to zero.

In an economy as rigid and set in its ways as Japan's, it's hard to exaggerate the significance of all this. The moves enraged Japan Inc, but impressed peers. Jurgen Schrempp, chief executive officer of DaimlerChrysler AG, nicknamed Ghosn the "Icebreaker".

By limiting his choices to Japanese, Ghosn will be picking from a much smaller talent pool. Picking the politically correct person doesn't mean you're getting the right one. Think about where Nissan might be today if it shied away from giving the top job to non-Japanese Ghosn in 1999.

Such thinking runs counter to the globalisation trend Ghosn has both personified and harnessed. He used the forces of globalisation to justify firing workers and scrapping old contracts with Japanese companies. They also were his excuse for bringing a brain trust of Renault folks to Japan from France.

To keep profit growing, Ghosn is investing in China and the US, the world's fastest-growing and biggest car markets, respectively. That's meant moving Japanese jobs to other countries. Let's hope Ghosn's successor has a similarly global view. He's reticent on succession plans, except to say that a Japanese would increase motivation among employees. One wonders if Ghosn is bowing to internal pressure to return leadership to a local who has worked his way up Nissan's corporate ladder.

Investors have every reason to worry that person may be less inclined to follow Ghosn's roadmap. Ghosn proved that, with all due respect to Japanese business practices, hardheaded Western-style restructuring can be both possible and needed in the world's second-biggest economy.

William Pesek Jr is a columnist for Bloomberg.