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Get Four
|  | OCTOBER 1, 2004
How Renault Jump-Started Nissan Louis Schweitzer, the French carmaker's CEO, on the revival's key elements: "Linchpin" Carlos Ghosn, trust, and a performance focus Louis Schweitzer, Chairman and CEO of Renault (RNAUF ), made one of the boldest bets in the automotive industry in March, 1999, when he paid $5.4 billion for a controlling stake in Japan's near-bankrupt Nissan (NSANY ) and dispatched his No. 2, Carlos Ghosn, to turn it around. Now Schweitzer's 44% stake is worth three times what he paid for it, and the dramatic revival at Nissan is legend. However, the alliance is just revving up. This month, the first cars built on a common Nissan-Renault platform are rolling off the assembly line in France -- a subcompact minivan called the Modus that shares a base with the Nissan Micra. That will save Renault an estimated $550 million a year, thanks to joint components purchasing. Schweitzer, a grand nephew of Albert Schweitzer, a humanitarian, missionary, and surgeon who won the 1952 Nobel Peace Prize, not only revived Renault from near-bankruptcy in the 1990s, he set it well on its way to becoming a global player, thanks to the Nissan alliance. In six months Schweitzer will hand over the job of CEO at Renault to Ghosn, who will return from Japan but retain his title of CEO at Nissan. Schweitzer spoke with BusinessWeek European Correspondent Gail Edmondson from his Paris office about the secret receipt for making a global auto alliance work. Here are edited excerpts of their conversation: Q: Is it true that you were more confident Carlos Ghosn could turn around Nissan than he was? A: That was one of the very few differences between Carlos Ghosn and me. Ghosn gave it 50-50, and I gave it 90-10. Q: What made you so sure you could make a French-Japanese alliance work when everyone said it would fail? A: I considered Nissan a basically sound company. It was a good company with a management problem.... The plants were good, the engineering was good, and the quality was good. The basics were there. The management was not there. It's easier to change the management of a company than the fundamentals. The Nissan people wanted an alliance or partnership. They knew they needed it, and they wanted it. They were determined. Another important factor: We had great clarity in our relationship. In the fall of 1998, I presented to Mr Hanawa, then Nissan's CEO, a draft press release of the alliance, including what we wanted to establish -- with all the legal documents. Carlos and I presented Nissan's management [with] a turnaround plan. So, four months before we went public with the announcement of the alliance, it was clear to Nissan what we would do. After 1999, we did exactly what we said we would do. The most important point was trust. The next point was Carlos himself. I knew how good he was. He was the linchpin. Carlos went with a very small team. He had the ability, the charisma to succeed. That was essential. Q: Wasn't it risky putting the entire top management on the line to meet targets in a year or resign? Very few top execs are willing to do that. A: We both put our jobs on the line. Carlos and I had a lunch to discuss the plan, and we agreed if this doesn't succeed, at least two people would be fired -- him and me. This was before the announcement of the alliance and after DaimlerChrysler (DCX ) dropped out of the running for Nissan. Ghosn said it would take three years. Q: Were there other factors vital to the success of the alliance? A: The alliance concept. It isn't about creating a single company that merges two cultures. [French author Antoine de] Saint-Exupery has a saying that being together is not looking at each other, it's looking forward in the same direction. Most mergers [run the] risk that people aren't focused on what they want to achieve -- they aren't focused on the business, they turn inward instead of outward. It was clear from the start our objective was performance, not creating a single [corporate] personality. Q: Where does the alliance go from here? A: Many believe the next step is structural, since Carlos will become CEO of Renault and Nissan. But I don't believe [that]. It's implementing profitable growth in different markets. [Bringing] Renault [models] to China. We're really doing things that are new but not changing the structure of the alliance. Of course, it's a bit complex, but that reflects the realities of life. We're two companies that are 10,000 kilometers apart.... I don't feel we have reached the potential of what this alliance can achieve. We can achieve still more. Q: What was the turning point in the turnaround? A: The major milestone -- and the one time I was a bit nervous -- was a moment when the reaction of financial markets was the opposite of my reaction. On Oct. 18, 1999, Carlos announced the revival plan, including the closing of five factories. My preoccupation was not that the plan wasn't adequate -- it was. My preoccupation was the acceptance by Nissan people and by Japanese society. The plan was in line with what we had announced four months before we announced our alliance -- but no one had ever done this before. I was very nervous it would be rejected or considered unacceptable. What was very striking is that it was considered absolutely acceptable. Within Nissan, there was no debate. From that date I was reassured. Surprisingly, after Oct. 18, however, Nissan's share price went down.
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