Nissan Rethinks Its Keiretsu - management structure - Brief Article

Automotive Industries,  Feb, 2000  by Marjorie Sorge

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Carlos Ghosn wants the new, smaller supply chain to be a watchdog that barks when new technologies come knocking.

Don't be surprised if a "Ghosneretsu" replaces the traditional keiretsu at Nissan within three years. A new supplier network is an integral part of Chief Operating Officer Carlos Ghosn's plan to make the ailing automaker profitable in fiscal 2000 and cut its $13.2 billion debt in half.

"This is not about fixing Nissan products for one or two years. It is about establishing a supply base for the future," Ghosn tells AI in a recent interview.

Nissan is in the midst of a three-year revival plan -- much of which is driven by improving products -- that requires a 50 percent cut in the supply base and an average 20 percent cost reduction. Meeting those goals is "ail about putting the suppliers inside the company and asking them to take a responsible part of the competitive situation," Ghosn says. "We cannot make decisions by not listening to the suppliers or ignoring them."

While this sounds somewhat like a new kind of keiretsu -- "call it a `Ghosneretsu' or whatever," he says -- the goal is to build a supply chain based on partnership, competitiveness and trust. Nissan wants its suppliers to act as "watch guards or body guards" that make certain the company stays competitive in technology components, systems and modules.

The suppliers Nissan chooses will be the ones that don't just readily agree to the price cut, but ask questions about standards and specifications. Initial agreements are for three years. Longer contracts may be available, depending on performance. Still, insiders worry that some suppliers may accept the dramatic 20 percent cut to use up excess capacity and may ultimately not be able to hit the targets.

While that is a possibility, industry experts are optimistic about Ghosn's plan. "So far, everything has been done right," observes Bill Pochiluk, a partner at consulting firm PricewaterhouseCoopers.

Along with building new supplier relationships is another challenge: Create appealing new vehicles. Here's what's coming to North America:

* A new Altima in 2002. No longer undersized and outgunned, it will be bigger than the Toyota Camry and Honda Accord and finally offer a V-6 option.

* The reborn Z-car in 2002, a sorely-needed image and traffic builder.

* A full-size pickup by 2003. The base unit will have an extended cab and there will be proper four-door cab. Since there will be two bodies, this truck could spawn a pickup-ute (see p. 106) and full-size SUV. A pickup-ute (what Nissan calls an SUT, or sport-utility truck) concept has been developed.

* The ITT -- The Infiniti version of a passenger-car-based SUV like the RX300. The Nissan version is called the NTT.

* A new Maxima in 2003.

* The XVL, shown at the Tokyo and Detroit auto shows, replaces the G20 in the Infiniti line in late 2000 or early 2001. It's much larger than the current G20

A new Q45 debuts for 2002 with a 4.5L V-8. It will debut at the New York Auto Show in April.

While 50 percent of Nissan's products are aimed at the North American market, Ghosn is also reviewing Nissan's conservative marketing, sales and distribution strategies in Japan. He says the lassez-faire attitude is over. "We will be announcing a strategy for the Japanese domestic market," he reports. "We don't intend to be the sleeping partner in Japan. We want to be an active competitor."

Nissan also plans to move quickly in South America. Brazil will get a great deal of attention. Renault entered the market three years ago and is becoming a better known brand. But it still lags far behind Fiat, Volkswagen, General Motors and Ford.

Jim Hall, an industry analyst at AutoPacific in Southfield, Mich., suggests selling Nissan cars as Renaults and perhaps establishing a Nissan truck brand. "Try and do too much, too fast, and they will find they're dealing with an octopus," he says.

Nissan's Mexican plants will build Nissan and Renault vehicles for South America, specifically Brazil. That cut the cost of Renault returning to Mexico by one-third to one-half of what it would have been to go it alone, says Renault CEO Louis Schweitzer. Decision time can also be slashed 30 to 40 percent.

Costs should also be cut as the "Ghosneretsu" is extended to Renault, when the two automakers share platforms in the near future.

RELATED ARTICLE: Ghosn's Weakness

Carlos Ghosn's biggest frustration is that he speaks Japanese sukoshi, or only a little. That, he says, is a weakness that translates into a loss of power.

"When you have not mastered the language, you lose a lot of the power of the word and explanation and communication," says the new COO of Nissan. "I must master Japanese," he says. "You lose a lot with an interpreter."

Ghosn is fluent in French, English and Portuguese and conversational in Spanish and Italian. But, while he can order dinner in a restaurant and carry on simple conversations, he wants to have detailed discussions in Japanese with other senior managers, people working on the shop floor and sales people in the dealerships.