Case Studies: Saving the Business Without Losing the Company
Case Studies: Saving the Business without Losing the Company 1.0 Introduction
Nissan’s position as a profitable and viable global automaker was in complete default by 1999. The once-strong company had lost money for six of seven consecutive years, beginning in 1992. Its global market share was in decline and the company was losing, on average, US$1,000 per vehicle sold in the United States. Carlos Ghosn knew that regeneration of the company product was imperative, but the product alone would not save the company. Thus, Louis Schweitzer, CEO of Renault, asked Carlos Ghosn to lead turnaround at Nissan. The two companies had agree to a major alliance in which Renault will cover the Nissan’s debt in return for 36.6% equity stake in the Japanese company. The merge would be the world’s fourth largest carmaker. The alliances deal made sense for both sides: Nissan‘s strength in North America filled an important gap for Renault, while Renault’s cash reduced Nissan’s mountain of debt. The capabilities of the two companies were also complementary: Renault was known for innovative design and Nissan for the quality of its engineering. Carlos Ghosn failed merge the company with Volvo before where they have some controversial decision about European plant closures, difficult for a French company with a tradition of state control.
Furthermore, Nissan’s debt amounted to more than $11 billion even after the Renault investment where this quite literally brings a “do-or-die” situation: Either they’d turn the business around or Nissan would cease to exist. Meanwhile, it was also extremely delicate situation where in corporate turnarounds, particularly those related to mergers or alliances; success is not simply a matter of making fundamental changes to a company’s organization and operations. But we also have to protect the company’s identity and the retain self-esteem of its employees. Those two goals- making changes and safe-guarding identity-can easily come into conflict;
Nissan’s position as a profitable and viable global automaker was in complete default by 1999. The once-strong company had lost money for six of seven consecutive years, beginning in 1992. Its global market share was in decline and the company was losing, on average, US$1,000 per vehicle sold in the United States. Carlos Ghosn knew that regeneration of the company product was imperative, but the product alone would not save the company. Thus, Louis Schweitzer, CEO of Renault, asked Carlos Ghosn to lead turnaround at Nissan. The two companies had agree to a major alliance in which Renault will cover the Nissan’s debt in return for 36.6% equity stake in the Japanese company. The merge would be the world’s fourth largest carmaker. The alliances deal made sense for both sides: Nissan‘s strength in North America filled an important gap for Renault, while Renault’s cash reduced Nissan’s mountain of debt. The capabilities of the two companies were also complementary: Renault was known for innovative design and Nissan for the quality of its engineering. Carlos Ghosn failed merge the company with Volvo before where they have some controversial decision about European plant closures, difficult for a French company with a tradition of state control.
Furthermore, Nissan’s debt amounted to more than $11 billion even after the Renault investment where this quite literally brings a “do-or-die” situation: Either they’d turn the business around or Nissan would cease to exist. Meanwhile, it was also extremely delicate situation where in corporate turnarounds, particularly those related to mergers or alliances; success is not simply a matter of making fundamental changes to a company’s organization and operations. But we also have to protect the company’s identity and the retain self-esteem of its employees. Those two goals- making changes and safe-guarding identity-can easily come into conflict;
References: 1. http://www.qfinance.com/contentFiles/QF02/g6nvv430/13/0/turning-around-financial-performance.pdf 2. http://moodlearchive.epfl.ch/2011-2012/file.php/6721/m1_lausanne/Lectures_Week_1/20100122/Ghosn_2002_HBR.pdf 3. http://www.slideshare.net/dpark1/nissan-renault-merger 4. http://www.esmt.org/fm/479/ESMT-305-0047-1M.pdf 5. http://www.slideshare.net/kzamandarus/lessons-learnt-from-nissans-historic-revival 6.