N I S S A N T U R N A R O U N D

NISSAN’S TURNAROUND STORY

BY

RAMESH.CAMIT KUMAR.M

NISSAN BACKGROUND

1933 – Started as Jidosha Seizo Co. Ltd

1934 – Changed to Nissan Motor Co. Ltd.

1944 – Headquarters Shifted to Tokyo

1950 – Acquired Stake in Minsei Diesel Motors Co. Ltd.

1952 – Technological Cooperation with Austin Motors

1958 – Exports to USA

1959 – First overseas factory at Taiwan

1966 – Merged with Prince Motors Ltd.

1980 – Garner the worlds biggest auto market

1990 – Nissan’s decline started

DECLINE OF NISSAN

PROFITS

COMMUNICATION

H R MARKETING

PRODUCTS

INVESTMENTS

PRODUCTION

PRODUCTION

• High Costs

• Production Lag

• Over Capacity

• Outdated Product Line

• Keiretsu System

PRODUCT

• Outdated Models

• No New Designs

INVESTMENT

• Unrelated Investment

• Deep Debts

• High Interests

PROFIT

• Low Margin

• High Fixed Cost

MARKETING

• Poor Marketing

• Poor Brand Perception

• Dealers

HR

• Labour Problems

• Culture

COMMUNICATIONS

• Between Branches

• Between Departments

• Between Global Divisions

WHAT NISSAN DID?

GBRP – Global Business Reform Plan

• New Products

• Higher Margins

• Reduction of Over Capacity

• Disposal of Assets at Throw away Prices

WHY NISSAN FAILED?

• Concentration on Profits – Not on Volumes

• Lack of Funds

• Stocks Declared as Junk

• No Reduction in Employee

NISSAN JAPAN MARKET SHARE

GLOBAL MARKET SHARE DECLINE

TURN AROUND

THE TURN AROUND PROCESSSTAGE 1DECLINE

STAGE 2RESPONSE INTIATION

STAGE 3TRNSITION

STAGE 4OUTCOME

NADIR INDETERMINATEFAILURE

SUCCESS

TURNAROUND - DECLINE

• K-extinction

Macro & external factors responsible.

• R-extinction

Internal factors

• Sources of intervention triggers decline.

TURNAROUND – RESPONSE INITIATION

• Strategic response

Changing or adjusting businesses firm is currently involved in.

• Operating response

Way the business is being conducted, cost cutting and revenue generation.

TURNAROUND - TRANSITION

• Time taken for the results of the turnaround strategies to be seen.

TURNAROUND - OUTCOME

• Whether turnaround is accomplished or not• Determined using performance measures.

RENAULT – NISSAN ALLIANCE

• $ 5.4 bn for 36.8% stake

• Option for Renault – 44%

• Option for Nissan – 15%

• Renault bought out Nissan's European subsidiaries for $ 320 Mn

HIGHLIGHTS OF THE ALLIANCE

• Three Renault executives were appointed to the Nissan board

Yoshikazu Hanawa, President and CEO, Nissan was nominated for Renault board

• Formation of transnational organization

• Cross company teams

CARLOS GHOSN

MISSING ELEMENTS

• Clear profit orientation

• Focus on customers

• Sense of urgency

• Proper communication (internal and external)

• Employee empowerment

NRP OVERVIEW• Reducing operating costs by ¥1trillion.• Reducing number of suppliers.• Reducing new debt from ¥1.3trillion to

¥700billion by FY 2002.• Introduction of around 22 new products by 2002.• Reducing employees by 21000.• Reducing the assembly plants from 7 to 4 in

Japan.• Reducing manufacturing platforms from 24 to 15

in Japan.

NRP-OPERATING COSTS

REDUCING PURCHASING COSTS BY 20%• Centralizing the purchase activity.• Decreasing the number of suppliers.• Including services in global purchasing strategy.

YEAR 1999 2002

SUPPLIERS 1612 600

NRP-FINANCIAL COSTS

REDUCING FINANCIAL COSTS.• Centralize financial operations.• Disposing off land, securities and un related

investments.• Reducing sales inventory by 30%

YEAR 1999 2000

BANKS 200 15

FIN COSTS ¥90BN ¥24BN

NRP-S,G&A COSTS

REDUCE S,G&A COSTS BY 20%• Cut down sales incentives.• Streamlining dealer network.• Centralizing the advertisement function.

Japan 20%

Rest of the world 10%

REDUCTION IN DEALERS

NRP-PRODUCTS

INTRODUCE 22 NEW PRODUCTS & IMPROVE BRAND IMAGE.

• Centralizing the designer’s .

• Integration with engineering, sales & marketing team.

• Global brand identity strategy.

NRP-MANUFACTURING

ATTAINING THE MANUFACTURING EFFECIENCY.

• Reduction in over capacity.

• Establishing new plants, where necessary.

YEAR 1999 2000

PLATFORMS 24 7

ASSEMBLY PLANTS 15 4

NRP-HUMAN RESOURCES

TO REDUCE EMPLOYEES BY 21000.• Centralized hr function.

• Laying off, closing down plants, compensation strategies.

• Introduced performance based payments.

• Tie bonus with successful implementation of NRP.

RETURN TO TRACK

Announced profits in FY 2001.

profits - $ 3.92 Bn, operating margin – 7.9%

Debt reduced to $ 3.48 Bn.

Market shares started increasing.

Won car of the year award 2002.

WHAT LIES AHEAD?

NISSAN 180

• To sell 1 Mn additional units.

• Achieve op margins of 8%

• Zero net automotive debt.