Carlos Ghosn: I made my expertise through facing challenges that others don’t want to

Carlos Ghosn was the Chairman and CEO of the Renault-Nissan-Mitsubishi Alliance, the automotive collaboration of France's Groupe Renault, Japan's Nissan Motor Co. Ltd., and Mitsubishi Motors Corp. Mr. Ghosn spoke about his expertise in turnaround management and his journey to get there. In November 2018, he was arrested in Japan over allegations by Nissan and charged with several financial crimes, which he denies. After being held in a small cell for months, he escaped to Lebanon on December 20 while he was released on bail. The UN considers his arrests to be arbitrary with his human rights being violated.

Carlos Ghosn was also Chairman and CEO of Groupe Renault, Chairman, and CEO of Nissan Motor Co., and Chairman of Mitsubishi Motors Corp. Mr. Ghosn is best known for orchestrating the remarkable turnaround of Nissan Motors from near bankruptcy. In addition to being the auto industry’s longest-serving CEO (2001-2018), he was the first person to run two companies on the Fortune Global 500 list simultaneously. Under his leadership, the Alliance grew to be the world’s No.1 automotive group in 2017 and 2018. He established the Alliance as the leader in mass-marketed electric cars and a pioneer in autonomous drive and connected vehicles. Carlos Ghosn is globally renowned for his impressive turnaround management strategies. 

 

He has served on the advisory boards and advisory councils of many reputable academic institutions including Tsinghua University in Beijing and Stanford University in California. In recognition of his work and achievements, Mr. Ghosn has received numerous distinctions and awards from countries on all continents: Mexico, Brazil, Spain, England, France, Morocco, Lebanon, Japan among others. He graduated with engineering degrees from France’s École Polytechnique in 1974 and École des Mines de Paris in 1978. 

 

You are known as a world-class turnaround manager despite the incident of November 2019. Let's start the interview with why you decided to relocate to Beirut, Lebanon from Tokyo, Japan. 

 

I am currently located in Lebanon; the country I was raised in. In 2018, when Renault asked me to renew my mandate, I was planning to spend my retirement in Lebanon: I prepared a house and I was working on the transition towards an active retirement plan. I currently lead a different level and scope of activities: I have set in place an Executive Education Program entitled “Business Strategies and Performance” with the Holy Spirit University of Kaslik (USEK), I also spend a lot of time writing books – 2 of them have already been published, I am participating in documentaries, and I am working on a TV series. 

 

I also have some economic interests in Lebanon; I am the shareholder of some established companies, I am also dedicating some time to assist the youth in their startup initiatives and to support NGOs because the country is going through a severe financial and social crisis.

 

In 2018, I was very hesitant about the prospects of renewing my mandate with Renault; however, I did it. I could have never foreseen what was going to happen afterward. 


 

You previously mentioned that the French state doubled its voting rights in Renault while denying Nissan similar voting rights though they are equal shareholders. The Japanese Government was upset at this. If so, could it have been that the plot to topple you was to prevent the French state from gaining more influence over the Renault-Nissan-Mitsubishi alliance? What were the changes in revenue experienced by Nissan and Renault after your allegedly illegal arrest? 

 

When you say illegal arrest, you are spot on. It is the United Nations that took an official position against Japan and stated that my arrests were arbitrary and my human rights were violated.

 

They even asked Japan to investigate how these things can happen and asked Japan to compensate me for everything that I have been through. Japan ignored the UN experts’ opinion.

 

Going back to the performance of the companies, let me take you briefly down memory lane. In 1999, Nissan was about to go bankrupt; they have had two turnaround attempts that failed and they were desperate. Japan would have never called a foreigner to become the CEO of a very traditional Japanese company if they were not out of options. That is when I came in, in 1999 and dedicated 19 years of my life to rebuild this company. At the same time, Renault was a small company, barely known outside Europe. My main job in 2005 was to grow the company and make it global. In 2016, Mitsubishi Motors Company was also facing serious difficulties and I was called on to the rescue to revive it. 

 

In 2018, the Alliance “Renault-Nissan-Mitsubishi” - was the number one automaker worldwide. We were selling more than 10.6 million cars, and we were producing 11 million cars because we were even producing cars for other car companies. We were producing cars for Daimler, General Motors, Fiat, etc. We were the largest sellers and producers of vehicles in the world in 2018. This came with every company, Renault, Mitsubishi, and Nissan being profitable, each one of them growing, and each one of them paying dividends. The three of them made around 10 billion EUR (12 billion USD) of profit. We were number one in the world. 

 

After my arrest, unfortunately, the three companies faced major drops in their profitability. In 2020, aside from 2019, which was a terrible year, and two years after my arrest, each of the companies’ performance was decreasing, and there was no growth.

They declined in sales, and Nissan, Renault, and Mitsubishi paid no dividend; the three of them made a combined loss of 15 million euros (18 billion USD).

 

Some would say this is mainly because of Covid-19; my answer is, if this was the case then this would apply to the entire industry and the competition as well. However, this was not the case; the two main competitors of the alliance Toyota and Volkswagen were profitable. Toyota made 15 billion euros of profit, and Volkswagen made 10 billion euros of profit for the same year. Therefore, it was obvious that the alliance was stuck; that there was no more inspiration, no vision, and no cooperation. 

 

It makes me sad that after 19 years, building these hugely influential and effective conglomerates of car companies, to see it just going down. When management starts to give excuses for their bad results, it means the companies are really in bad shape and will remain so.

 

What do you think caused this loss?

 

It is always management. Some People would say: “When you left, everything collapsed, so it is your mistake.” You should know that after what happened with me, many individuals crucial to the company were fired or left. I had early on prepared for my succession, but the most prominent people I relied on to steer the company were laid off. The alliance had 450,000 employees and the key team comprised 20 people. As a CEO, if I lose these 20 people during my tenure, the company would certainly be in trouble.

The alliance and the management style were becoming too political; competent business people do not want to work for a very political organization.

 

The people who followed you out of the company are now handling key positions in global leading automotive groups. How did you prepare and help them grow to come this far? 

 

Once, I was at dinner in the Elysée Palace in France with the French President Emmanuel Macron, and he came to me and told me: “When I look into the car industry, it looks like a Ghosn school.”

 

Here are a few of the names of people that left Nissan after my incident: Jose Muñoz, left three weeks after the arrest, and he became the Global COO of Hyundai. Thierry Bolloré, that I put in to replace me as head of Renault was fired after ten months because he wanted to confront the situation; he is now the CEO of Jaguar Land Rover. Carlos Tavares left for PSA. Didier Leroy for Toyota, among many others. 

 

As a business leader, I choose people depending on their character and their past performance. Then you teach them by sending them into difficult situations; you need to help them and give them challenges that are each time, a little bit more difficult. You help them grow and gain confidence and become CEOs. 

 

I am a performance-driven person, which means give me your results, I am going to tell you who you are. Not your result in three months or six months, but your results in five years. I do not believe in turnarounds where you establish your reputation in one year.

If it is a real turnaround, you need to develop your reputation five years, ten years, and 15 years down the road. 

 

That is why other competitors, suppliers, and different stakeholders, hire the people on my team; they know they were challenged in their careers, and they had to deal with difficult and demanding situations. They have also certainly looked at the alliance results, and said if they are coming from the “Ghosn School” as the French president Macron stated it, they must be achievers; individuals we can count on. 

 

You have helped several countries to grow their car industry. Please tell us about some of your experiences.

 

I have contributed to the set-up of car manufacturing industries for many countries. I have developed a big plant in Morocco following the government’s decision to expand the car industry. I have negotiated with Morocco's government to establish a huge plant on the port of Tangier, which has become the biggest plant of all carmakers in Africa. It is worth mentioning that only 10 percent of the production goes to the Moroccan market; 90 percent is exported to Europe, the Middle East, and the rest of Africa. Every country with a good plan can be part of the car industry, but you should carefully analyze your particularities. There is no one solution that you can copy; you can copy the approach, but it has to be specific to your own country, considering the geography, borders, trade agreements, etc. 

 

You have much experience working with the governments in many countries. Which governments do you think work the best in this regard? Additionally, do you think the French state will exit Renault?

 

The presence of any State in a company should be temporary. It can be justified for a short period, such as when there is a financial crisis or when companies are collapsing due to bad management. Governments need to be like guardians at a certain point in time, but they do not know what it takes to manage it. Here are a few examples:

 

As you know, the French government used to own 100 percent of Renault. Then it went to 40 and then down to 15%. So now, they detain only 15 percent of the company. 

I also worked with Russia and negotiated with President Putin on taking Avtovaz back to the private sector. It is the largest carmaker in Russia who used to be 100 percent owned by the state. Today Avtovaz belongs to Renault.

So, we made the transition from a state-owned company to a private company and it is doing very well.

 

There is also the Chinese example in 2003. At that moment, Mr. Li Rongrong was the minister in charge of state-owned companies. Nissan and Dongfeng Motor Group formed a 50:50 joint venture with the name Dongfeng Motor Co., Ltd. (DFL). We became partners to help them rejuvenate and become a more profitable company.

 

Based on this very long experience of dealing with many states, for a company to grow and prosper, it should turn into the private sector.

 

I understand, however, if you say that we have a lot of state-owned companies. I also understand if a progressive government puts private initiatives in state-owned companies. You need however to bring in the right executives and to train the people, etc. I think it is a very virtuous move, and I would encourage you to look at what China has done, what Russia has done, and what the Americans have done. 

 

Last, during the financial crisis of 2008, General Motors collapsed, Chrysler collapsed, etc. The US Government bought back General Motors and Chrysler. The State-owned the two companies 100 percent. When the companies recovered, the State would leave and would sell its shares with a profit. Now General Motors is doing very well thanks to two things; government intervention and government exit. If the government stays, you have a big problem because most politicians are not good at managing companies. You never have a successful politician become a successful businessperson, but you have successful business people become successful heads of states. So, the fact that it is only one way around means something. 

 

What was the most challenging job you have accomplished?

 

The most challenging job was turning around Nissan in Japan in 1999. Usually, turnarounds are complicated, and not a lot of people have been successful at doing so. The most significant turnarounds in history are Lee Iacocca, who turned around Chrysler. Lou Gerstner turned around IBM, and you have Steve Jobs who turned around Apple. Usually, these are people in their own countries with their own cultures.

 

In the case of Nissan, we are talking about a complete foreigner coming into a country that is not known for being very open. Everyone knows that the Japanese are a very communitarian county. They usually do not receive foreigners with open arms. So, I came to Japan not knowing the culture and not speaking the language. It was a tough task; it was such a tough task that nobody gave me any chances of being successful. The media said that this will be a disaster and that they do not know how or for how long it will last… I was successful because I was determined. It was a massive challenge for me, and I surrounded myself with good Japanese people who wanted to save their company. You have to be extremely solid personally, and you have to surround yourself with people who want to fight with you, not against you. 

 

This turnaround by a foreigner is still considered as an example, and top universities such as Harvard, Stanford, London School of Economics, Columbia, and Wharton among others, use it to teach how a person can be successful with so many odds against him. 

 

What did you start with?

 

With any turnaround, you need to start with the diagnosis of the situation. You spend time listening to people, and you go on the ground, visit the plants, the foreign countries, the suppliers, the dealers, the employees, the operators, and the executives. Then, you ask them a very simple question: “Why is this company in trouble, and what is the solution?” 

 

The very important thing is that you also need to establish priorities. Many turnarounds fail because they go after the penny, and they forget the pounds. In the case of the turnaround of Nissan, Nissan was terrible at purchasing. Carmakers are big buyers. Nissan is a 100 billion dollars company that is bought for 50 billion dollars every year. If you do not buy well, then you are doomed. 

 

Buying is essential; you should know what to buy, and the standards are important as well. It does not make sense to stop air conditioning in the office and make small pitiful savings while at the same time the purchasing is out of control. Turnaround cannot be something where you are trying to run after 30 rabbits at the same time. First, you detect the largest one and go after it. Then, you let the others run and you go after them later on, one by one without ever being distracted. 

 

Also, establishing the diagnosis, setting the priorities, and going after the priority in a very disciplined way is necessary. Good communication is another key element. People are afraid, and you need to communicate with them and tell them that you are doing this for a particular reason. In any challenging situation, you need to give people hope and show them quick results. Always keep in mind that strategy is only 5 percent of the job, 95 percent is through execution. 

 

What is Turnaround Management? What was the state of Renault before your management? In your experience, what does it take to revitalize a state-owned company?

 

It is not something you choose, and you grow into… My first company was Michelin; I had many jobs there, and there was no crisis. Then, all of a sudden, there was a problem with the Brazilian subsidiary. There was financial turmoil, the inflation in Brazil reached 3000 percent a year in 1986, and workers would frequently go on strikes. The French people managing Michelin in Brazil could not even understand how to handle a situation like this. All the expatriates at Michelin Brazil were asking to go out, to be relocated.

 

At that moment, I was 30 years old, living in France. I said to my management that I wanted to go to Brazil; my argument was that the people working at Michelin were seniors, and the problem is entirely out of their scope of thinking... A young person can perhaps imagine solutions in a situation like this, and I am willing to do that. It took me four months to convince the CEO of Michelin that I should go there. He was desperate, so he sent me. I turned it around in two years with a very small group of competent people. I worked very hard and for very long hours; we did not sleep at night, I was present at the moment and I loved my job; I was very excited about it!

 

The most important thing is that we delivered. If you say, “I want to go in,” and you take a bulletin, and you die, it is no good. You want to get results, and when I got results, I was transferred to the United States, which at the time was the largest market for Michelin. 

 

I made my expertise in turnaround through my willingness to face challenges and bring solutions that other people did not want to. I did not care about failing. In a certain way, if you worry too much about being successful, you will not take charge.

If I failed there, then I would have ended up doing something else, but I knew that if I were successful, the reward would be worth it. 

 

When I went to Japan in 1999, I was asked by the Renault CEO if I wanted to go work in Tokyo. I said no because I have a wife and four children, and I had just arrived back in France. He told me that if I do not go there, he would not sign the alliance. He even said to the Wall Street Journal that he would not have signed the deal if he did not have me. Before I went, he asked me what I think my odds of success are, and I said 50 percent. He said that if he felt that it was only 50 percent, he would have never done the deal. He thought that the odds were more favorable to me than I thought. 

 

I knew the risk. I was afraid to fail like any other person, but I thought about it as another huge challenge. Then, when I arrived in Japan, everybody was confused about my background and thought, “What? Is he French? Lebanese? Brazilian? Is he coming from a tiny small company? He is coming to mighty Japan? How can he help us and deliver? And this journey lasted 18 years. 

 

What is your advice to state-owned companies that are operating at a loss due to Covid-19? If you were still the CEO of Renault and Nissan right now, what measures would you take to deal with successfully running the businesses amid the pandemic?

 

I would be doing something completely different than what the present CEOs of Renault, Nissan, and Mitsubishi are doing. Toyota and Volkswagen made good decisions. Meanwhile, the Alliance made terrible decisions during the past 2 years; they are now reaping the consequences.

 

Covid was a difficult time, but I do not think a company would collapse because of it unless it is initially fragile.

 

Covid came, and it was a kind of selection of the fittest in a way. This is something we see in the history of companies. In the last ten years, there were so many crises. First, we had the financial crisis in 2008, and we had the tsunami in 2011 that destroyed Japan, then we had the euro crisis for many years. Now we have the Covid. There is always a crisis; so you need to prepare for it and adapt to it. A crisis is also an excellent test of how fit your company is.

 

Sharing the same vision, goals, and values are oftentimes challenging among founders, chairmen, CEOs, and successors. You ran two of the world’s largest companies at the same time whilst serving as a board director for Mitsubishi. How did you coordinate all this, and lead them into a unified direction? 

 

Usually, the best unifier particularly when there are transitions is to have strong common projects. If you do not have them, people will be fighting against each other, criticizing each other. You have inside turmoil in an organization when people are not concentrated on looking in the same direction; a project is something that people usually want to succeed in. They will be thinking about what their contribution to the success of this project is. If you have no project or have projects that are not well communicated or boring, then people start to shoot at each other. You need a strong project that is carried out by a strong team. They need to make it as attractive as possible to focus on their contribution instead of nitpicking at each other. 

 

In addition to work, you have given lectures at many universities in the world. You are still advising young Lebanese start-ups, and investing in their projects from the income you receive training directors of the largest companies around the world. Could you elaborate on this?

 

Transmitting your experience to the next generation is essential. I have been through so many crises, and I have so many things that I could share. Transmitting this to other people is very important. These people can be in Lebanon or outside Lebanon as well. I have witnessed globalization for the past 60 years and seen how countries are opening, how free trade is developing, how large conglomerates are developing across the planet, etc. Developing countries are moving up and participating in this global economy. Having been through this in one of the major industries in the world, I think I must pass it on, not only to new generations but also to new countries. 

 

Many countries want to play a role in this movement and do not know where to start. They want to be surrounded by people who have been through this and give them advice on how to do it, on the traps and opportunities, and to share their experiences. From time to time, they need to hear what happened in the past and what solutions were applied in the past. The past is not the guide for the future, but understanding the past is great preparation for the future. 

 

Carlos Ghosn was interviewed by B.Enkhtsetseg, International Business Journalist, and Editor of Vision Magazine. The magazine is a quarterly publication of Guren Graduate Institute, official partner of The Boston Post Media Group.