Ghosn - 'We Don't Have A Choice' PDF

2/27/2020 GHOSN: 'WE DON'T HAVE A CHOICE'
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November 08, 1999 12:00 AM
GHOSN: 'WE DON'T HAVE A CHOICE'
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Ailing Nissan Motor Co. Ltd. must swallow a bitter pill in order to make a full recovery. Among the medications
prescribed by Nissan COO Carlos Ghosn:
Slash debt to $6.7 billion by 2003
Shut ve factories
Cut costs 20 percent
Eliminate 21,000 jobs by 2003
Ghosn spelled out his plan to resuscitate the automaker in an Oct. 18 speech before the Tokyo Motor Show. The text of
that speech follows.
As promised, I am here to communicate to you the Nissan revival plan on the eve of the Tokyo Motor Show.
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This communication is addressed simultaneously inside our company. The members of the executive committee will
relay my message and give forth information inside Nissan, which explains their absence from this room today.
The outline of our meeting will be the following:
After a brief introduction, I will develop the diagnosis of our current situation from past performance analysis and from
the numerous discussions I had across the world inside and outside the company with Nissan's employees and partners,
whether they are suppliers, dealers, shareholders or business partners.
Secondly, I will unveil to you the Nissan revival plan, the way it was elaborated, its key contents and the expected
impacts.
Third, I will share with you our commitments.
A brief conclusion will end our estimated 45-minute presentation; then we have set aside 40 minutes to answer your
questions.
Since the signing of the alliance with Renault on March 27, we have been on a fast track and intensive schedule.
On May 28, we closed the transaction.
On June 25, the shareholders general assembly elected a new Board of Directors.
On July 1, the new executive management team o cially started its work.
On Sept. 1, 17 expatriate Renault managers were assigned to Nissan.
And today, Oct. 18, we are here to announce the Nissan revival plan.
The key facts and gures about Nissan point to a reality: Nissan is in bad shape.
I will limit myself today to three indicators which show it clearly:

Nissan has been losing global market share continuously since 1991.
We were at 6.6 percent world market share in 1991.
Today, we are at 4.9 percent world market share. We lost 1.7 points of world market share since 1991.
Our production has dropped by more than 600,000 cars over the same period of time.
This drop, for example, represents 25 percent more than the total annual car sales of the Volvo brand in 1998.
Obviously, the signi cant decrease of the Japanese domestic market had a negative impact on us. But in Japan, Nissan
lost market share too, regardless of whether we consider the total market to be with or without the minicars.
Nissan has been struggling with its pro tability since 1991. Seven of the last eight years, including our forecast for 1999,
show a loss.
Nissan has been, and still is, a highly indebted company. Net debt, excluding sales nance, was around 2.1 trillion yen at
the end of scal year 1998.
If we take it at a conversion rate of 110 yen per dollar, it was approximately $19.4 billion.
We estimate our net debt level today, after the capital injection from Renault, to be at 1.4 trillion yen, or $12.6 billion.
These gures, along with numerous other facts and realities, made you and a lot of analysts and experts comment that
the challenge of putting Nissan back on track would be a very di cult, if not impossible one.
But for us, that doubled our conviction that the only way to revival required a high level of lucidity, a high level of rigor and
resistance to the temptations of complacency and compromise. In analyzing the past, we had only one objective:
Understanding the root causes of our current problems in order to act decisively and utilize them as opportunities for
progress.
In my opinion, ve main reasons explain Nissan's past performance:
Lack of a clear pro t orientation.
Insu cient focus on customers and too much focus on chasing competitors.
Lack of cross-functional, cross border, intra-hierarchical lines, work in the company.
Lack of a sense of urgency.
No shared vision or common long-term plan.
These are all clear opportunities for progress especially when we consider that Nissan has a strong base for recovery
that I would like to summarize the following way:
Nissan has established a signi cant international presence and global reach.
Nissan has developed a world leading manufacturing system.
Nissan has reached a leading edge in selective crucial technological elds.
Nissan has formed an alliance with Renault.
Last and not least, the people in Nissan are proud, technically competent, dedicated and are now motivated to pull the
company out of trouble, to make it a competitive and strong company again in order to establish a balanced relationship
with Renault. This obviously would not be the case in an alliance where one of the partners is weaker than the other.
I would like to seize this opportunity offered to me today to thank Hanawasan and all of Nissan's associates who, during
the last six months, extended to me hospitality, open-mindedness, a level of participation, trust and made me feel
entirely part of the Nissan team and at home in Japan.
Let's talk about our plan.

How did we elaborate it? On July 5, we established, at the executive committee meeting, nine cross-functional teams.
Each one of them was placed under the leadership of two Executive Committee members.
Each one of them was headed by a pilot.
The members were jointly selected by the leaders and the pilot from the management ranks. The composition had to be
cross-functional and international.
Each team had a topic: You can see the list of the selected topics on the screen.
One goal: to make proposals in order to develop the business and to reduce costs.
One deadline: This morning's Board meeting for nal o cial decision making.
One rule: No sacred cows, no taboos, no constraints.
The cross-functional teams were established according to one strong belief: The solutions to Nissan's problems are
inside the company.
They worked hard and they delivered.
Two hundred people were directly and continuously involved and hundreds of others contributed to their work.
Two thousand ideas were assessed.
Proposals were submitted and debated with the Executive Committee members.
This is the way we elaborated the Nissan revival plan. It is not top-down, it is not bottom-up, it is both.
The cross-functional teams will not stop there. They will continue in the future in a slightly different con guration.
We need them to make sure that the plan will be entirely implemented, that the stream of new ideas will continue to ow
smoothly inside the company, including to the top management level. They constitute a network for Nissan's progress.
Let me share with you now the key contents of our plan.
As you know, there is no problem at a car company that good products can't solve.
We have identi ed new product opportunities: entirely new products, new derivative products, enhanced existing
products.
I know that you would all love to see our new projects, but so would our competitors.
But we can give you some examples of our work.
We are going to start with enhancing our lineup of products for the U.S. We have the new Sentra next February, a new
Q45 in April 2001, a medium sedan later that year and an entirely new minivan to replace the Quest. On top of that, we
will add four entirely new products to our lineup - including the Z car.
In Japan, we are going to simplify our lineup with fewer but stronger products. You can see one of them, the XVL, at the
auto show this week and in a little more than a year, we will launch a new recreational vehicle, a new Cima and a new
Primera. And of course the new March and Cube will come out on our new common B platform with Renault by mid-
2002.
In Europe, from now until 2003, we will entirely revamp our car lineup: the new Almera, the Tino minivan in July of 2000, a
new recreational vehicle in 2001, a new Primera in early 2002 and a new Micra at the very beginning of 2003.
The rest of world won't be forgotten; we've got 32 projects from our cross-functional team currently under study.
On top of that, we are studying the feasibility and pro tability of 11 new car or body derivatives and I am con dent that
the best of those projects will make it to the markets before the end of 2002.
Product development will be at the heart of Nissan's revival.
Further developments of associated businesses were decided too. By associated businesses, we mean used-cars
business, parts and after sales business and sales nance operations, still focusing on our core business. For obvious
competitive reasons, we will not unveil today the decisions reached in those elds worldwide.
With the help of a renowned consultant, we identi ed and quanti ed our brand de ciency.
It is a fact that today, Nissan cars are sold at a lower price than a comparably competitive car in the U.S., in Japan and in
Europe.
Let's take the U.S. market for example: On average, across the product lineup offered in the American market, our cars
sell for $1,000 less than totally comparable cars from competitors.
In Europe, this amount per car is estimated at 700 Euros. In Japan, at a minimum of 40,000 yen per car sold.
We already started an effort to clarify our brand identity and have given ourselves three more months to establish a long-
term action plan to restore our brand power.
Our target is to reduce by a minimum of 35 percent in the next three years the price differential induced by the present
level of our brand power and to eliminate that differential over the next decade.
Our styling has not always been an asset. It has to be more attractive and consistent. Shiro Nakamura has joined us
today as Nissan's head of design. He will be fully empowered along with a re-enhanced styling team, with the mission to
bring back to Nissan's car design, the attractiveness and the consistency it urgently needs.
We are engaging in an effort to reduce lead times. As you know, there are three critical lead times: car or powertrain
project development time, order to delivery time and foreign markets start of sales.
On car and powertrain project development time, we will bene t signi cantly from the reduction of the number of
platforms.
Developing a new car from an existing platform takes considerably less time (30 to 50 percent less) than developing a
new platform.
Today it takes us 12 to 18 months to start the sales of a new car in a foreign market after the new car is launched in
Japan, for example.
This situation leads to more incentives offered in the foreign markets while waiting for an already known replacement.
Our objective for the next three years is to be able to limit start of sales to no more than three months.
The alliance with Renault offers numerous opportunities. Let me give you three examples.
The most obvious one is our sales development in Europe by joining forces without damaging two different brand
identities.
We are now establishing an action plan to signi cantly increase our presence in South America, particularly in Brazil and
in Argentina using the existing Renault organization and infrastructure (manufacturing plants, supplier networks,
distribution system).
We are working with Renault Credit International to set up a Mexican sales nance company. Nissan is the only major
car manufacturer in Mexico that does not have a sales nance company. This obviously doesn't allow a full development
of our sales and pro t potential.
All the business development projects, including the ones that we didn't mention today will take time and resources
before signi cantly and positively impacting the pro tability of Nissan. However, their net impact will already be positive
over the next three years.
But I would like you to keep in mind when we analyze the bottom line of the Nissan revival plan, that the only factor we
have taken into consideration is the impact of brand restoration on reducing incentives. This is computed under SG&A
cost reductions. The other bene ts we expect from business development have not been factored into the total impact
of this plan.
Our target is to reduce our purchasing costs by 20 percent over three years.
For FY 2000, 7 percent in FY 2001 and 6.5 percent for FY 2002, which leads to a compounded 20 percent cost reduction
on average by FY 2002.
This will be in addition to the current plan for FY 1999 that is not yet realized.
Average means that the different categories and subcategories of purchasing will not carry the same objective, but that
the average will be 20 percent. By category, we mean material purchasing, parts purchasing, equipment purchasing,
services purchasing. By subcategory we mean that in parts purchasing for example, electronics will not carry the same
objective as batteries or seats.
This is a crucial objective, because purchasing represents 60 percent of our total costs or a minimum of 58 percent of
our net sales.
How will we do this?
Today, Nissan buys parts and materials on a regional basis or even in certain areas on a country basis. This will stop
immediately. Purchasing will be centralized and globalized.
Services purchasing, which represents at least 600 billion yen a year, will be included in the global purchasing strategy.
Sourcing decisions in all categories will be strictly based on credible performance commitment. This clearly means that
sourcing from our a liates will be no exception to this guideline.
We have too many suppliers. We estimate the number of our parts and materials suppliers to be 1,145 groups. There will
be no more than 600 in 2002.
We estimate the number of our equipment suppliers and main services suppliers to be 6,900. There will be no more than
3,400 in 2002.
Overall we will divide by two the number of suppliers to the Nissan group, which automatically means that our chosen
suppliers, existing or new ones, will signi cantly increase their business with us.
We will encourage and support partnerships with competitive global suppliers in order to bene t from worldwide best
practices and performances in technology development, cost quality and delivery.
We will develop teamwork between our purchasing, our engineering and our suppliers in order to work effectively and
quickly on every single cost reduction proposal.
When necessary we will challenge our own speci cations and standards - as long as it does not jeopardize the high level
of reliability and quality that our customers enjoy today or are expecting from us in the future.
This is an effort to eliminate duplication and overengineering. It is not an effort to trade cost reductions for quality
enhancement. And I can tell you, there is plenty of room to maneuver.
This effort will gather suppliers, purchasing and engineering and will be called Nissan 333. This will represent at least
one-third of the purchasing cost reduction.
The alliance with Renault presents us with a lot of opportunities ranging from common purchasing in select areas, using
common suppliers, moving to common standards - to exchanging of best practices and best performances and
conducting common benchmarking.
Our suppliers are vital for our success.
We will implement our plan with a strong resolve and open-mindedness. That's why we will establish in the near future a
suppliers advisory council that I will chair. This council will monitor the changes that the Nissan revival plan will need
both inside Nissan and in suppliers' organizations, and offer an opportunity for a free exchange of opinion with our
supplier base.
At Nissan, we commit ourselves to develop partnerships, based from the suppliers' side on a continuously high level of
competitiveness committed to and demonstrated by our chosen suppliers.
And from our side we commit to a signi cant increase in business for them, high market shares, global management
and long-term visibility. We'll help those who help us.
Speed is of the essence for us. That's why the rst suppliers to clearly and credibly commit to the Nissan revival plan will
be the rst ones we will sign contracts with. This effort starts now; we will not wait for the beginning of FY 2000 next
April.
Our target is to achieve optimum manufacturing e ciency and a high level of global cost competitiveness.
Our manufacturing plants are, and are considered to be, if not the most productive in the world, at least at the top level of
productivity.
Numerous international reports, including the Harbour Report and the Economist Intelligence Unit Report, con rm it year
after year.
The Sunderland plant in the U.K. was my benchmark when I was at Renault. The Smyrna plant is at the top in North
America.
Our plants in Japan are also at a high level of productivity compared to Smyrna and Sunderland, and even with the
absence of o cial reports in Japan, we know we are doing well compared to the competitors.
But manufacturing productivity, even though an essential ingredient, doesn't lead automatically to cost effectiveness and
overall e ciency. Fifty percent of our manufacturing costs are xed costs.
As you know, a shrinking production level cannot be continuously divided between the same number of manufacturing
facilities without the company taking the risk of weakening its cost competitiveness.
We have to make sure that we don't carry too much capacity, compared to what we have to produce in the foreseeable
future.
We have to make sure we have a rational and simpli ed production scheme.

We have to be effective in our logistics scheme.
And within our lean manufacturing base, we have to build a exible one.
Our action plan is the following.
We are going to reduce our vehicle assembly and powertrain capacity in Japan.
Nissan recently announced car assembly capacity of 2 million units in Japan, which was calculated based on 3,660
hours of use per year.
We have adopted for future reference to calculate and run our capacity a level of 4,400 hours of use per year. This
corresponds to a 'fully loaded two-shift operation,' by that I mean an extension of our current two-shift operation. For
example, we could add a half hour in the morning shift, one hour in the afternoon shift and six additional shifts a month.
Based on this, our present capacity in vehicle assembly is actually a minimum of 2.4 million vehicles.
Taking into consideration our long-term forecasts, we have decided to reduce by 30 percent the current capacity to 1.65
million vehicles.
For your information, our estimated production in Japan for FY 1999 is 1.28 million vehicles, which means that we are
operating at a 53 percent level of capacity utilization.
If we produce at the level of FY 1999 in the new industrial scheme, we will be operating above 77 percent.
In fact, with a conservative forecast of production increase in Japan of 5.5 percent - to 1.35 million vehicles in FY 2002 -
we will be above 82 percent capacity utilization.
If we are rewarded with more successful sales, we can run our capacities, at least on a temporary basis, at 5,000 hours a
year.
Consequently, we will implement the following plant closures.

For car assembly plants:
Murayama Plant
Nissan Shatai Kyoto Plant
Aichi Kikai Minato Plant (this one we have already announced in February) - will be closed in March 2001
For powertrains:
Kurihama Plant
Kyushu Engine Shop - will be closed March 2.
Why those plants?
We have evaluated our vehicle assembly plants based on logistics, environment, potential use of land and relative age.
For powertrain operations, we mainly took into consideration the life cycle of products produced in those shops.
The plant closures, however painful they are - and they really are - will allow us to signi cantly increase the productivity
and the cost effectiveness of the remaining plants. This will guarantee their future by allowing them to be industry
leaders, both in terms of productivity and in terms of cost effectiveness.
At the same time, we will take this opportunity to rationalize and simplify our industrial organization, taking advantage of
the reduction of the number of Nissan platforms.
You can see here the complexity of our present car assembly system in Japan with 24 platforms divided between seven
plants. In 2002 we will have 15 platforms divided between four plants. And in 2004 we will have 12 platforms divided
between four plants.
You can notice that we have concentrated the majority of platform diversity in one plant, Shonan.
As we divide the production from the closed sites among the remaining facilities, each plant will increase volume on
average by 50 percent, bene ting productivity and cost effectiveness.
As a result of the consolidation, the average production per platform per site will increase from 50,000 today to 80,000 in
2002 and 100,000 in 2004.
In our powertrain operations, we will decrease by 30 percent the number of technical engine/transmission combinations
by FY 2002.
We will further reduce our operating costs by globalizing logistics and enhancing best practices exchanged on a global
scale between our manufacturing plants.
At the same time that we will be building a leaner manufacturing system, we will be increasing its exibility to meet
market demands and evolutions by an extended use of our already announced Flexible Manufacturing System.
This new process will allow us to reduce by 50 percent the present lead times and costs of car-line transfers from one
production line to another, whether this transfer is considered within the same plant or between two plants.
Our target is to reduce by 20 percent our sales general and administrative costs, which are at a very high level compared
to the best car manufacturers.
Brand power restoration (as we mentioned it earlier) will help reduce sales incentives.
We will establish a contract with one main global advertising company in order to support a coherent global brand
management and reduce our costs.
We will modernize and streamline our distribution structure.
The domestic Japanese dealer organization will be carefully revamped.
Our main actions will include:
Reducing our distribution subsidiaries by 20 percent in order to develop a more entrepreneurial spirit in our distribution
network.
Closing 10 percent of the total retail outlets to limit territorial overlap and intra-Nissan dealer competition.
Selectively extending opening hours to make it more convenient for our customers.
Creating prefecture business centers or common back o ces to increase effectiveness and reduce costs.
Bringing back to Nissan most of the 1,000 employees who have been sent to the dealerships that our dealers don't really
need.
In the United States, we will streamline our regional organization. The precise plan will be communicated in the U.S. by
Dec. 1, 1999.
In Europe we will leverage our alliance with Renault by establishing common hubs, common back o ces and by
promoting in a select number of countries common operational entities.
At the same time, to promote e-commerce, we are establishing an alliance with CarPoint - aimed at extending our reach
on the Internet with Japan's largest online business.
We established a plan to reduce xed overhead costs. I will give you two examples of these measures.
Information systems are being outsourced in the U.S. to a major supplier with a 25 percent cost savings contract.
We are also rationalizing worldwide and headquarters o ces. For example, we will close our o ces in New York and
Washington, D.C.
The target is to improve nancial management in our company and reduce nancial costs.
We will centralize nancial operations worldwide by creating a global treasury, funding and cash management functions
and by developing global nancial controls and risk management.
Today, Nissan has shareholdings in 1,394 companies. In more than 50 percent of them, Nissan shareholding is above 20
percent.
With the exception of four companies, none is considered to be indispensable for the future.
This means we will be unwinding most of our shareholdings strictly on the basis of a cost/bene t analysis.
We will be disposing of land, securities and noncore assets.
We have adopted an inventory reduction program aiming at a 30 percent decrease from our current inventory to sales
level by 2002.
Our objective is to free all capital resources from nonstrategic, noncore assets and be able to invest more in our core
business, while at the same time signi cantly reducing our debt.
Our target is to develop and optimize our research and development capability and capacity.
We will move to a globally integrated organization. Nissan Technical Center will be in charge of worldwide r&d which
means that regional r&d centers in the U.S., Europe and a liated companies will be more integrated with NTC in terms of
strategy, processes, standards and benchmarks.
At the same time, we will empower them to take more responsibility for the entire product line offered in their region,
whether they developed it or not. This is obviously not the case today.
Speci c r&d resources will be entirely dedicated to cost reduction activities with suppliers in the Nissan 333 program
which aims, as I said previously, to contribute to more than one-third of the purchasing cost reduction target.
R&d will focus on core technologies and will increasingly rely on our suppliers for technologies they can develop better
than we can. This will avoid time and cost consuming duplications.
Engineering productivity will increase by the introduction and extension of more effective and powerful computer
assisted engineering systems.
The alliance with Renault will allow further optimization through shared research, shared advanced engineering projects,
common engines and common platforms - like the already decided Clio/Twingo/March/Micra/ Cube platform.
The objective here is not to transform two r&d organizations into one, but to make a precise and swift division of the
tasks and projects between two distinct organizations, to avoid duplication and support early adoption of common
standards and common suppliers.
All of these actions will allow us to increase our technological strength and boost r&d output, while minimizing the
amount of additional resources necessary.
Our target is to move from the current multiregional organization to a real global one.
We will be creating a worldwide headquarters in charge of strategy, corporate planning, management control and global
brand management.
We will develop globally controlled functions with an emphasis on r&d, purchasing, manufacturing system, nance and
human resources.
To enhance cross-functionality and pro t orientation, we will name and empower six program directors.
Today we have 29 product project directors reporting to the product planning group. They will be divided into six
programs, each one headed by a program director.
The newly established PDs will be coordinated by an EVP and will report directly to the executive committee on their
projects and on the performances targeted and achieved.
A performance-oriented compensation will be established for management starting in 2000. Bonuses and stock options
plans are currently being studied and will be part of the incentives offered to boost Nissan pro tability and growth.
A performance-based career advancement will be established at the latest by the end of FY 2000 to make sure we act in
a coherent manner across the company.
I know that some changes mentioned here may raise some concern or anxiety in our international operations, or in our
a liated companies.
They often complained that Tokyo is more focused on the Japanese market than on international markets, that the
answers to their concerns were often vague or lengthy or both.
Concretely, some of the changes will not be implemented before ensuring that the people in charge have changed their
attitude, and that the clear performance indicators for which they are accountable exist - encompassing worldwide
performance, not only performance in Japan.
We want to think and arbitrate globally, act and empower locally, within the framework of a clear strategy and precise
guidelines.
Worldwide headquarters and global functions should act and be seen as coaches, not masters.
Mainly, they will be pragmatic supporters of company performance, not merely 'rules keepers.'
As for Nissan group employees, if you take into consideration the future consolidation method for numbers of
employees - consolidation of all companies where Nissan has more than 40 percent shareholding - today we have
148,000 employees vs. 131,000 under the present consolidated method.
Our forecast of employment for FY 2002, taking into consideration a conservative 6 percent increase in activity - 2
percent on average per year - between FY99 and FY02, and including spinoffs, is 127,000 in equivalent full-time
employees.
This means a 21,000 headcount reduction or 14 percent of total employment. We are aiming overall for a productivity
increase of a minimum of 20 percent.
This headcount reduction will be achieved through natural attrition, increase in part-time and ex-time schedules,
spinoffs and early retirement programs.
We want to handle the headcount reduction as smoothly as possible, especially in the Japanese manufacturing area.
Transfers will be offered to all direct and semidirect employees.
In order to facilitate the transfers, hiring will be strictly limited and monitored by H.R.
Limited activities will continue temporarily on two sites after the close-downs. At Murayama, 300 out of 2,450 people in
the plant will take care of stamping, plastic injection and plating.
Also, 100 people will continue assembling the Civilian in Kyoto, as long as it is justi ed in a business sense.
The breakdown of the worldwide headcount reduction is the following:
4,000 in manufacturing
6,500 in Japanese dealer a liated network
6,000 in SG&A
5,000 spinoff - this is a conservative estimate.
The headcount for r&d will increase by 500.
In fact, there will be more recruitment in r&d if we take into consideration spun-off businesses and natural attrition.
A 200 billion yen provision will be booked in FY99 to cover write-off of assets and social costs.
In addition to the provisions directly linked to the revival plan, the FY99 accounts will also bear the accounting impact of
unrecognized losses, such as the cost of overdue past pension liabilities.
These extraordinary elements explain why FY99 net results will show a signi cant loss, much larger than the one
previously forecast in May of 1999.
The Nissan revival plan's total impact on cost reduction will be two-pronged:
From one side, a noncomputed effect of the business development efforts, especially in terms of new product
opportunities.
And from the other side, a cost reduction effort that represents 1 trillion yen, taking scal year 1998 as the base and
including as we mentioned throughout our presentation, synergies with Renault.
When we analyze our FY98 pro t and loss account we observe that the cost structure of Nissan is the following:
60 percent purchasing costs
23 percent SG&A costs
11 percent manufacturing costs
3 percent r&d costs
3 percent miscellaneous costs.
The 1 trillion yen cost reduction of Nissan revival plan will have the following contributions:
60 percent from purchasing
28 percent from SG&A
10 percent from manufacturing
2 percent from the others.
The capital gains from disposals of assets made possible by the revival plan (land, building, equipment, companies) are
not included here.
The Nissan revival plan will help us face the following:
The uncertainties of international markets (mainly North America and Europe), which are at historically high levels.
Foreign exchange rate uncertainties. We are vulnerable to further yen strengthening. Currently, Nissan's exposure to
yen/dollar uctuation is $7 billion, which means that a 10 percent variation in the yen parity to the dollar would have a
$700 million impact on our bottom line.
Technological evolutions for environmental protection and fuel consumption are essential in our strategy, but they are
becoming increasingly expensive. We have to dedicate su cient resources to build our leadership.
Competitive pressure on pricing and overequipment.
In conclusion, we expect only a portion of Nissan's revival plan cost savings to impact our bottom line in the coming
three years.
What are our commitments?
Return to pro tability for FY 2000. The net income after tax of the Nissan group will be positive. This is our short-term
and primary commitment.
An operating pro t superior to 4.5 percent of sales for FY 2002.
We will unveil in the beginning of FY 2001 our pro t target for FY 2004, which should clearly show the pro t and growth
potential of Nissan, unleashed by the Nissan revival plan.
A 50 percent decrease from the current net debt level. Today our estimated net debt level stands at 1.4 trillion yen (that's
$12.6 billion), however by FY 2002 our net debt cap will be less than 700 billion yen (less than $6.3 billion).
This decrease will be done at the same time that we will be increasing investments from the very low level reached in
1998 (3.7 percent of net sales) to more normal levels of 5 percent of net sales.
In conclusion, we explained to you today what Nissan's situation is. We told you what we are going to do about it. We
unveiled to your our commitments.
The Nissan revival plan is our plan to prepare Nissan's future. Its objectives and commitments will not change. It is a
consistent and reliable guideline for the next three years and beyond.
We reached today a very important step after three months of common, accelerated and intensive work -
communication, debate and decision making.
But establishing the plan represents at most 5 percent of the challenge; 95 percent of the challenge now lies in its
execution. That is what we are going to focus on from now on.
The direction is clearly and rmly established.
The excellence in the implementation will be key to delivering the full potential of the Nissan revival plan.
The top management rst and the management will be accountable for delivering the committed performance - all of it.
I know and I measure how much effort, how much sacri ce and how much pain we will have to endure for the success
of the Nissan revival plan. But believe me, we don't have a choice and it will be worth it.
We all shared a dream: a dream of a reconstructed and revived company, a dream of a thoughtful and bold Nissan on
track to perform pro table growth in a balanced alliance with Renault to create a major global player in the world car
industry.
This dream becomes today a vision with the Nissan revival plan. This vision will become a reality as long as every single
Nissan employee will share it with us.
Thank you for your attention.
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Ghosn - 'We Don't Have A Choice' PDF

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2/27/2020 GHOSN: 'WE DON'T HAVE A CHOICE'

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Home  Automakers & Suppliers

November 08, 1999 12:00 AM

GHOSN: 'WE DON'T HAVE A CHOICE'

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Slash debt to $6.7 billion by 2003

Cut costs 20 percent

Eliminate 21,000 jobs by 2003

The outline of our meeting will be the following:

Third, I will share with you our commitments.

On May 28, we closed the transaction.

On Sept. 1, 17 expatriate Renault managers were assigned to Nissan.

I will limit myself today to three indicators which show it clearly:

We were at 6.6 percent world market share in 1991.

In my opinion, ve main reasons explain Nissan's past performance:

Lack of a clear pro t orientation.

Lack of cross-functional, cross border, intra-hierarchical lines, work in the company.

Lack of a sense of urgency.

No shared vision or common long-term plan.

Nissan has developed a world leading manufacturing system.

Nissan has reached a leading edge in selective crucial technological elds.

Nissan has formed an alliance with Renault.

Let's talk about our plan.

Each one of them was headed by a pilot.

One rule: No sacred cows, no taboos, no constraints.

They worked hard and they delivered.

Two thousand ideas were assessed.

But we can give you some examples of our work.

Product development will be at the heart of Nissan's revival.

How will we do this?

Our suppliers are vital for our success.

We have to make sure we have a rational and simpli ed production scheme.

We have to be effective in our logistics scheme.

Our action plan is the following.

Consequently, we will implement the following plant closures.

For car assembly plants:

Nissan Shatai Kyoto Plant

Kyushu Engine Shop - will be closed March 2.

Why those plants?

We will modernize and streamline our distribution structure.

The domestic Japanese dealer organization will be carefully revamped.

Our main actions will include:

We will be disposing of land, securities and noncore assets.

Transfers will be offered to all direct and semidirect employees.

The breakdown of the worldwide headcount reduction is the following:

6,500 in Japanese dealer a liated network

5,000 spinoff - this is a conservative estimate.

The headcount for r&d will increase by 500.

60 percent purchasing costs

23 percent SG&A costs

11 percent manufacturing costs

3 percent r&d costs

3 percent miscellaneous costs.

60 percent from purchasing

28 percent from SG&A

10 percent from manufacturing

2 percent from the others.

The Nissan revival plan will help us face the following:

Competitive pressure on pricing and overequipment.

What are our commitments?

An operating pro t superior to 4.5 percent of sales for FY 2002.

The direction is clearly and rmly established.