Keller

In 1998 Nissan was on the ropes. The company was hemorrhaging cash and it continued to suffer from lackluster products that ensured a falling market share. With Nissan heading toward bankruptcy, its president mounted a worldwide campaign to snare a rich partner to help Nissan through its financial mess.

Since the American experience in Japan had been lackluster at best and financially painful at worst, there was no excitement in Detroit over a bailout effort that would be both expensive and distracting. The unlikely rescuer was Renault and its former tire company executive, Carlos Ghosn.

Under Ghosn’s leadership Nissan went from losing billions to making billions within three years. The company is now on a roll launching new eye-catching models, increasing its capacity in the United States and restoring its once debt-ridden balance sheet.

The miraculous Nissan turnaround has made Ghosn a corporate icon in Japan. The speed of the turnaround compared to the General Motors and Ford decade long odyssey of trying to revive Saab and Jaguar, respectively, or Chrysler’s plunge into the red after bringing a dowry of $7 billion to Daimler at the time of the “merger” has left auto executives around the world asking how he did it. In reality, Nissan had assets that most ailing auto companies lack but Renault’s strategy also has a message in it.

For starters, Renault sent in the “A team” to fix the mess. They carried the clout to get the job done and they didn’t have to clear every move with the home office because they were the home office. They went without knowing much of Japanese business culture but they knew what had to be done to stop the cash drain. After a face-saving few months, the top Japanese management was kicked out, an essential part of any turnaround since the guys who made the mess couldn’t be allowed to remain in their offices grousing at the foreigners who were not playing by Japanese rules.

Then Renault did not predicate a Nissan turnaround on theories of global parts and product sharing, a seemingly indispensable ingredient in every acquisition of every down-and-out auto company on the planet. How often have all of us heard the inflated cost savings estimates that justify spending billions of an auto company that is more a name than a business!

Instead, Ghosn and his team knew that Nissan had to be revived before there could be any talk of collaboration with Renault. Nissan had to save itself and that work had to take precedent over some grand global scheme to justify the investment. Instead of synergy teams that looked for ways to globally source paper clips, Ghosn fixed Nissan from the inside without any interference from Renault.

Renault and Ghosn got lucky in that Nissan, at the operating level, was still a very strong company. It had suffered through three decades of miserable leadership but they knew how to build cars. What Ghosn found was a company with rich engineering expertise, strong production skills and plenty of interesting products that could be sped to the market. Unlike most acquisitions, including Daimler’s takeover of Chrysler, the future product cupboard wasn’t bare. Ultimately cost cutting doesn’t save an auto company, product does.

Ghosn also found plenty of assets that could be quickly converted into cash. Nissan was loaded with shares of its keiretsu affiliates and mostly its suppliers. That stock was sold off as fast as possible to provide the company with cash to run the business and pay down debt, a trend which many Japanese companies subsequently embraced. That let him buy parts and components from the lowest cost or best supplier not one that was a member of the Nissan family. Excess staff was terminated and some capacity in Japan closed.

Nissan is now restored as a full member of the Japanese Big 3. It will increase its market share in the United States and elsewhere to the dismay of its rivals. And it will be done without slapping a Nissan badge on the rump of a Renault car.

Maryann Keller is a veteran auto industry analyst and author of the books “Rude Awakening: The Rise, Fall and Struggle to Recover at General Motors” and “Collision: GM, Toyota and Volkswagen and the Race to Own the 21st Century.”