Nissan Chief Executive Carlos Ghosn is only 51, but his résumé is already chock-a-block with turnarounds. He has engineered the most dramatic comeback in automotive history, leading Japan's No. 2 carmaker from near-bankruptcy to global profit leader a year ahead of plan. That achievement comes on the heels of restructurings of French carmaker Renault and tire giant Michelin. So what does the unstoppable Ghosn do for an encore? He'll run two globe-spanning auto makers, another industry first. On Apr. 29, Ghosn returns as CEO at $53 billion Renault, which owns 44% of Nissan, while retaining his CEO position at $70 billion Nissan Motor Co. (NSANY ). Combined, the Renault-Nissan alliance is selling more cars than any company except General Motors (GM ), Toyota (TM ), and Ford (F ), with a 9.3% global market share, up from 8.9% in 2000. "It's the only alliance in the auto industry that has really worked well," says Michael Raab, an auto analyst at Sal. Oppenheim Jr. & Co. in Frankfurt.
Now comes Phase Two -- intensifying cost savings and grabbing more global share. Running two huge carmakers may well be the most taxing assignment yet for Ghosn. "It's a massive undertaking," says Jean-François Manzoni, professor of leadership and organizational development at IMD International in Lausanne, Switzerland, who has written a case study on Ghosn's turnaround at Nissan. "The risk is Ghosn getting so overworked that he loses the very [thing] that makes him great: his high bandwidth -- the ability to process a lot of complex information rapidly."
There will be a lot to process. Renault has had a successful run under retiring boss Louis Schweitzer. The French company has become one of Europe's most profitable mass-market carmakers, pushing into emerging markets and winning accolades for edgy design and top safety ratings. But Schweitzer is leaving plenty of challenges for Ghosn. Japanese and Korean auto makers are stepping up their attack on Europe's stagnant car market and forcing margins down on everything from mini cars to compact sedans -- Renault's core products. Rival Toyota Motor Corp. boosted its European market share to over 5.5% last year, up from 3.7% in 2000. Even French rival PSA Peugeot Citroën has higher plant productivity than Renault. Worst of all, PSA and Toyota have teamed up in a joint venture that in March began producing three huggable new minis in the low-wage Czech Republic. To weld a world-beating alliance out of challengers Renault and Nissan, Ghosn will need to squeeze better performance from nearly every operation at Renault while stepping up collaboration between two far-flung empires. In an interview with the French magazine Challenges, Ghosn says there will be "no taboos" in the drive to hike performance.
Ghosn's to-do list at Renault includes bolstering quality, improving plant efficiency, fixing the large-car business, and accelerating the company's drive to go global. In 2004, for example, French rival Peugeot produced 24.3 cars per employee vs. Renault's 19.5, according to a recent Morgan Stanley (MWD ) report. "Renault is not in crisis," says Garel Rhys, professor of automotive economics at Cardiff Business School at the University of Wales. "But its operating margin, which ranges from 3% to 5%, needs to be, say, 6% to 8% to sustain the company as a global player long term." To boost margins, Ghosn will have to increase sales, plus rev up cost savings from joint purchasing, development, and platform-sharing with Nissan. The French factory that makes Renault's unsuccessful executive sedan the Vel Satis, for example, might switch to a midsize sport utility built on a Nissan platform. Nissan execs already have hinted that the next Primera sedan, to be launched in late 2006 or 2007, might share a platform with Renault's Laguna and be built at the same plant, saving $130 million in costs.
Imposing Japanese-style quality and efficiency is a must if the French company is to have a shot at reentering the U.S., a goal Schweitzer and Ghosn have set for some time after 2010. Renault currently lacks distinctive models that would set it apart in the crowded U.S., but analysts say it could develop a new SUV or crossover on a joint platform with Nissan, wielding French design flair to give it a high profile. "It's an opportunity to tap a market they exited in the 1980s that is the largest in the world," says Adam Jonas, an auto analyst at Morgan Stanley in London.
What about the other carmaker Ghosn still has to run? With its 10% margins, Nissan is the world's most profitable auto maker, but it has trouble spots, too. The stock has trailed Toyota's and the Japanese indexes so far this year on fears that Ghosn will boost incentives to meet his heady goals for Nissan in the U.S. According to Autodata Corp., Nissan's U.S. incentives rose 40% last year, to $1,926 a vehicle, compared with a 5% rise for Toyota, to $874. Ghosn's plan to take Nissan's popular Infiniti luxury sedan global should help shore up profits.
NEEDED: FLAWLESS EXECUTION
Another issue worrying investors is whether the culture change at Nissan is strong enough to stick when Ghosn starts splitting his time among three continents. To go head-to-head with leader Toyota around the globe, Nissan's execution must be flawless. That leaves little room for slip-ups such as the quality debacle at Nissan's Canton (Miss.) factory last year as the new Armada SUV and Quest minivan hit showrooms.
Any new quality setbacks at Nissan could distract Ghosn from one of his major tasks at Renault: deepening cooperation with Nissan. Renault's Modus mini car, which launched last fall and starts at $16,700, was the first model built on a Nissan platform. By 2010 the alliance aims to produce all of its cars on 10 platforms, down from 42 in 2000. Morgan Stanley figures Renault's auto division will reap savings of some $518 million in 2005, largely thanks to the alliance.
Those savings will help margins just as Ghosn assumes responsibility for a major Renault initiative: the worldwide rollout of a supercheap car for the masses, the $6,500 Logan. Built in Renault's Romania plant and in joint ventures in India and Russia, the Logan is Renault's bid to grab more share in emerging markets. Renault forecasts sales of more than 1 million units by 2010. But even if the car is a hit, the low-margin Logan will produce minimal profits.
Minimal profits, of course, are not what Ghosn is all about. A Brazilian-born polyglot who can be both charismatic and ruthless, Ghosn did not make his mark in the industry by leaving things as he found them. Watch for a shakeup at Renault when the new boss returns for another round.
By Gail Edmondson in Frankfurt, with Ian Rowley in Tokyo, Chester Dawson in New York, and David Welch in Detroit