Carlos Ghosn’s legacy at risk following massive scandal at Nissan

After a multibillion-dollar investment early in the decade, Renault is a leader in electric vehicles, though sales figures have not matched Ghosn’s predictions, and a host of competitors are about to enter the market. Backed by the muscle of the alliance, Renault says it is ready to compete in autonomous vehicles and mobility services; Ghosn has promised a robotaxi service by 2022.

Multicultural background

Ghosn was born in Brazil in 1954 to Lebanese parents. At age 6, he returned to Lebanon, where he received a Jesuit education before enrolling in the prestigious Polytechnic University in Paris to study mathematics. Ghosn completed his education at the School of Mines in Paris, like the Polytechnic, one of France’s “Grandes Ecoles,” where leaders in business, government and science are trained.

Ghosn had intended to pursue graduate studies in economics, but he was persuaded to enter the business world by an executive at Michelin, which was seeking, in Ghosn’s words, “a Brazilian engineer with a French education to work in Rio de Janeiro.” He started in 1978 in Michelin’s rigorous management training program, where he asked to be assigned to production rather than research. Within three years he was promoted to manager of Michelin’s new plant in Puy, France; at the age of 27 he was the youngest member of the management team.

In 1985, Ghosn was sent to Brazil, with a mandate to fix Michelin’s struggling operations there. Two years later, after a top-to-bottom reorganization, the division was profitable, and in 1989 CEO Francois Michelin sent Ghosn to a much bigger playing field: the United States. Ghosn arrived at a critical time, as Michelin had just bought a competitor, Uniroyal-Goodrich.

It was there that Ghosn showed two of his managerial strengths, rigorous cost-cutting (he closed three factories) and the ability to blend diverse corporate cultures. It was also where he learned how to become an “American CEO” — competing directly with rivals and observing the U.S. auto market first hand. Bob Lutz, then president of Chrysler, made a deep impression on Ghosn with his forthright style.

‘Le Cost Killer’

In 1996, at age 42, Ghosn was recruited by Renault as an executive vice president, and a potential heir apparent, to CEO Louis Schweitzer, as the automaker was transitioning from a state-controlled enterprise. In addition, Renault was facing heavy losses and had just pulled out of the North American market and sold American Motors — including Jeep — to Chrysler. A proposed merger with Volvo did not materialize.

His first task at Renault was to reduce overall costs by a total of 20 billion francs, or about $4 billion at the time. As part of that plan, Renault closed its factory in Vilvoorde, Belgium — and Ghosn acquired his nickname, “Le Cost Killer.”

Ghosn’s next proving ground was Nissan, which was struggling with annual deficits that had led to about $20 billion in automotive debt, and was nearing insolvency. Factories were underutilized, and market share had declined for decades. Ghosn had been an advocate for the merger; he had presented his Renault cost-cutting plan to Nissan directors; and further, he was Schweitzer’s lone choice for the job.

He first had to navigate daunting cultural differences. Nonetheless, Ghosn described himself as “the perfect outsider — foreign to Japan, to its networks, to its conventions and to its prejudices.”

Over several months, Ghosn and his managers — including about 30 Renault executives — devised the Nissan Revival Plan, to take effect on April 1, 2000. The plan was hashed out by what he called cross-functional teams, in areas such as growth, purchasing, research and development, and manufacturing. The specifics of the plan included lowering purchasing costs by 20 percent; reducing the number of plants by three, and closing 10 percent of dealerships. He also divested Nissan of much of its holdings in affiliate companies, a system known as keiretsu. About 21,000 jobs, 14 percent of the workforce, were to be cut.

The plan promised a return to profitability in the 2000 fiscal year, and a profit margin of 4.5 percent by 2002 — and Ghosn said he would quit if he did not reach those targets. In 2003, Nissan’s operating margin was 11.1 percent, at the top of the auto industry.

Taking over at Renault

As planned, Ghosn succeeded Schweitzer as CEO at Renault in 2005, and he simultaneously ran both Nissan and Renault for more than a decade. The ownership structure, in which Renault holds 43 percent of Nissan and Nissan 15 percent of Renault, has remained steady — but a continual source of tension. That is partly due to the involvement of the French government’s 15 percent stake in Renault, which has also tamped investors’ enthusiasm for Renault stock, and also prevented a further merger with Nissan. For Nissan’s part, as the larger of the two principles, it has seen the alliance as somewhat one-sided despite the many synergies between the two companies.

Ghosn surrendered the CEO post at Nissan to Hiroto Saikawa in February 2017. Until this week, he held chairmanships at Nissan, Renault and Mitsubishi, and at the Dutch-registered holding company that oversees combined alliance synergies.

Under his stewardship at Renault, Dacia, a Communist-era Romanian automaker that Renault acquired in 1999, became Europe’s bargain-brand leader. Its models are the cornerstone of Renault’s Global Access Program, which sells low-cost cars in emerging and developing countries including Brazil, India and North Africa. In 2016, Renault consolidated the operations of AvtoVAZ in Russia, which makes Lada, at a low point in the volatile Russian market, and it has started showing a profit this year after a turnaround plan was implemented.

In 2016, Renault became the second-best selling brand in Europe, after VW, and the group’s global sales in 2017 reached a high of 3.76 million, growing 8.5 percent to beat the market by more than six percentage points.

There have been a few bumps in Ghosn’s road. In 2011, his longtime lieutenant Patrick Pelata left Renault after three executives were falsely accused of industrial espionage. Two years later, COO Carlos Tavares, now CEO of PSA Group, left after publicly expressing his desire to run his own car company. Ghosn has also clashed with the French government over issues of his pay, and the alliance’s corporate structure.

Last year, he dismissed reports that the alliance was setting up a secret bonus compensation pool, saying that the plan had come, unsolicited, from an outside financial adviser.

None of those events managed to seriously ding Ghosn’s armor — though there were signs that his influence was waning — and he appeared to be orchestrating his own departure, on his terms, as he neared the usual retirement age.

“Leading takes a lot of stamina,” Ghosn said in an interview with consulting firm McKinsey in 2012. “I became CEO at 45, and I was working like a beast. You think, ‘So I work 15 or 16 hours a day; who cares?’ But you can’t do that when you are 60 or 65.”

Earlier this year, Ghosn was appointed CEO at Renault for another four-year term, but he agreed to take 20 percent pay cut and focus more on strengthening the alliance for his eventual departure. Ghosn also passed day-to-day duties at Renault to Thierry Bollore, who was promoted to COO.

He said in an interview with Automotive News Europe in October this year that he would complete his work to build up the alliance and create a succession plan “sooner rather than later,” and would not serve out his full term at Renault. “I personally am not worried that the alliance will survive after I leave,” he said.