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Ghosn's Plan

Not all that long ago—but it seems like a lifetime in this industry, which has undergone changes at a rate that’s been uncharacteristic since the early days of the 20th century, when there were similar technology developments and challenges and organizational flux—Carlos Ghosn was the go-to guy who could not only turn companies around, but propel them into the future.

Not all that long ago—but it seems like a lifetime in this industry, which has undergone changes at a rate that’s been uncharacteristic since the early days of the 20th century, when there were similar technology developments and challenges and organizational flux—Carlos Ghosn was the go-to guy who could not only turn companies around, but propel them into the future. He is a man given to creating bold, strategic plans and programs which, arguably, were instrumental in transforming the fortunes of Nissan in the early ‘00s, having become the chairman and CEO of that company in 2000. In 2005 he was named the chairman and CEO of Renault, as well, so now he has the top position at both parts of the Renault-Nissan Alliance, which was formed in 1999.

For some reason, Ghosn seems to have become less visible, at least here in North America. Perhaps it has something to do with the struggling European scene. In early February, Ghosn laid out a new plan for Renault named “Renault 2016—Drive the Change,” a six-year plan with two goals: (1) having sales of >3 million vehicles in 2013 and (2) freeing cash flow based on generating operational profits, with an aggregate €2-billion by 2013, with a target of €3-billion.

What’s interesting are the seven “levers” that Ghosn and his team have identified as getting the company to where it needs to be in the short term (i.e., 2013) and to 2016. These are levers that can be wielded by companies be they vehicle manufacturers or product suppliers:

Innovation. Ghosn described it as “a crucial factor in preparing our future.” There are a few aspects that he identifies as to making innovation essential. The efficiency of internal combustion engines must be improved because of rising oil prices. There are CO2 emissions regulations that make having electric vehicles as part of the fleet important. But this point is possibly more important: “Innovation will enable the car to become a symbol of modernity once again in the mature markets.” Apple and its acolytes and imitators are the symbols of modernity. Auto needs to do something about its position in the minds of young people lest it become not much more.
 
Products. Here’s an interesting statement about electric vehicles, particularly in light of criticism that President Obama received for his statement during his 2011 State of the Union address about having one-million electric vehicles on the roads in the U.S. by 2015: “Between now and 2016, the Renault-Nissan Alliance plans to sell a cumulative 1.5 million electric vehicles—and we will have an installed capacity of 500,000 units per year by 2015,” Ghosn stated. While the U.S. is just one market for those EVs, it is a significant one and there are other vehicle manufacturers selling into the market, so arguably that million EVs isn’t all that astonishing.

Brand. Here is a sign of guts. “Dacia and Renault Samsung Motors are strong brands, offering their respective customers consistent products and services and a clear positioning. But as for the Renault brand, we feel it is not sufficiently strong today,” Ghosn said. When is the last time you heard a CEO say anything other than sweetness and light about their company?

Customer relations. This is primarily about dealers. But again Ghosn was plain speaking: “We have to admit that the car industry has to make significant progress to match performance in other sectors.”

R&D. He talked about reducing spending via collaborating with other companies, such as working with Nissan and sharing platforms with Daimler. They’re also going to initiate a modular design approach for parts standardization across vehicles. They’re going to increase parts carryover so that they’re able to reduce costs and improve time to market.

Cost reduction. The objective is to reduce costs 4% annual, with a 12% decline by 2013 and the 2016 goal of 15%. “Such a performance requires working across the entire vehicle value chain, from product definition through engineering, manufacturing, suppliers and logistics.”

Sales. Ghosn said that they think the world market for vehicles in 2016 will be 93 million units. And he wants a big piece of that. If the company does what he’s set out, then that is certainly more than conceivable.

Big plans. Stretch goals. Honesty. Commitment. Is there any company that doesn’t need to embrace them?

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