Rescuing Nissan from Crisis
Running a business successfully can be difficult if we do not know how to manage the entire company. When it is a small business, it is relatively easier to find the problems, and the earlier the problems were found, the easier to fix them. However, when it comes to a big company, it becomes harder to see problems because they usually take time to rise to the surface. Therefore, by the time we find out what is wrong, it can be too late to fix them. The company can lose a lot of money, and at the worst, it can go bankrupt. Nissan, which is the third largest car manufacturing company in Japan, was about going bankrupt in 1999. Nissan once sold one-third of all vehicles in Japan, and in 1975’s foreign automakers regarded Nissan as No.1 imported car in North America (Magee, 44). However, its debt has risen up to $22 billion in 1999. In fact, “Nissan’s domestic market share, which peaked at 34 percent in 1974, declined to below 19 percent in 1999. Nissan’s global market share declined from 6.6 percent in 1991 to 4.9 percent in 1999, eight-year period in which the company had just one profitable year (Magee, 44). How could such a successful company, which has been in car industry for over 73 years, become to be about bankrupt? And, how could Nissan revive?
In 1999, Nissan seemed that they only had a few choices to survive, either get help from the Japanese government or get help from foreign automakers. In 1999 Nissan chose to join hands with a foreign company, Renault, which had first lost 1 billion in ten years in 1996, and was about to divested the majority ownership by the French government (Magee, 32). This didn’t seem to be a good candidate for Nissan for alliance. Although the alliance between Nissan and Renault seemed that Nissan was making useless effort, the alliance actually has been successful, because a man, now President and CEO of Nissan, has been playing a big role in Nissan revival restoring confidence in the company, hope, and profit.
The alliance between Nissan and Renault appeared to be meaningless because Renault did not seem to be the proper company to rescue Nissan. Even though Renault reported deficit of 12.5 billion in 1984, and became profitable again by 1997 after Ghosn was in charge, no one thought that Renault could help Nissan (Magee, 34). Since Nissan was negotiating with Daimler Chrysler and also Ford, which two companies were much larger companies therefore had more resources to rescue Nissan, Renault even looked powerless and unsuitable for company to ally with (Magee 37). In fact, when Renault purchased 35 percent of equity stake, which resulted in injecting $35 billion to get some control of Nissan it was clear that it was not enough to cover $22 billion deficit at all (http://en.wikipedia_org/wiki/renault). Even after Renault invested more, the debt amounted to more than $11 billion (Harvard Business Review, Carlos Ghosn 38). Yet, while people regarded the alliance between Nissan and Renault meaningless, both companies had different points of views from others.
The alliance between Nissan and Renault actually was beneficial for both companies since the capability of two companies were complemental. Nissan had good reputation for its quality, but they lacked of strength in designing a new cars. Therefore, Ghosn assumed that Nissans problems were in management. On the other hand, Renault was known for its innovative design. In addition, Renault wanted to advance on outside of Europe, so that it made more sense to unite with Nissan than to unite with European companies. Furthermore, Renault was afraid of putting the company in a position where they could lose the majority of control over company if they would unite with other bigger and stronger companies (Magee, 36). In short, one’s weakness was one’s strength and vice versa. Eventually, after one year of negotiation, and Daimler Chrysler pulled out of negotiation on March 11,...
Cited: Carlos, Goshn. Shift: Inside Nissan’s Historic Revival. U.S.A, 2005. Print.
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