If there are two things Japan takes very seriously, it’s business and comic books. And it’s the rare personality who makes a splash in both realms. Rarer still if he’s a gaijin (foreigner).
In 1999, Carlos Ghosn took a job many thought was impossible: reviving money-losing Nissan Motor Co. The odds were stacked against a Brazilian-born, Lebanese-raised Frenchman, then 45, succeeding in insular Japan. By 2001, Ghosn was beating them by axing tens of thousands of workers, closing factories, chopping weak affiliates and shaking up a rigid management structure. That year, the best-selling “True Life of Carlos Ghosn” manga series hit bookstores.
Fifteen years later, investors are hoping he can repeat that feat at Mitsubishi Motors Corp. On Wednesday, Ghosn formally added the scandal-plagued company to his already full schedule steering Nissan and Renault S.A. Yet turning around Mitsubishi may be Ghosn’s biggest challenge to date as a fudged fuel-economy-data scandal dents sales and revenues. What’s more, Mitsubishi suffers from a relevance problem that predated its devastating Volkswagen moment.
Japan’s sixth-largest automaker by global sales volume lost $2.09 billion in the six months through September. In August, Mitsubishi suspended sales of eight models after the transport ministry busted executives overstating efficiency figures; they were off by as much as 8.8 percent. Chief Executive Officer Osamu Masuko blamed lax management oversight, paving the way for Nissan savior Ghosn to swoop in. In October, the 46 year-old Mitsubishi joined the Renault-Nissan alliance through a $2.3 billion capital injection, entrusting its future to a man dubbed “le cost killer.”
Ghosn’s legend grew as he took steps very few Japanese CEOs would ever consider. Along with ruthless overhead cuts, he implemented merit-based compensation and promotion systems. It’s hard to exaggerate how Japan Inc.’s seniority-based ethos kills productivity and innovation. Ghosn also eliminated entire levels of bureaucracy by scaling back “deputy” and “assistant” management titles. That way, new ideas, designs or processes could reach executive vice presidents many months earlier than was the case pre-1999.
Elements of that playbook are being applied to Mitsubishi, including the creation of a “chief performance office” role to ensure profit goals are on track. While all this will sound rather obvious to most Western executives, they’re still reasonably novel concepts in Asia’s second-biggest economy. Slavish devotion to “the Japanese way” helps explain why Prime Minister Shinzo Abe’s reform efforts have gained so little traction among executives.
Other Japan Inc. icons have tried their own Ghosn-like experiments. Sony making Welsh-born Howard Stringer CEO in 2005 was a warning to the company’s notorious silos that major change was afoot (even if Stringer achieved little. American Bobby Valentine managing the Chiba Lotte Marines baseball team is worth considering, too. In 2005, his blunt-talking ways led the team to its first Pacific League pennant in more than three decades (Valentine has been mentioned among U.S. President-elect Donald Trump’s picks for ambassador to Japan).
But smart and talented as he is, Ghosn is stretching himself seriously thin. This new Renault-Nissan-Mitsubishi alliance has obvious size-matters logic. It creates the No. 4 auto group after Toyota, Volkswagen and General Motors. And the challenges span the globe, from figuring out the alliance’s presence in Britain as Brexit unfolds to uncertainty surrounding Trump’s threatened trade wars to weakening demand in Japan. Demographics at home augur poorly for auto sales.
This last dynamic has Mitsubishi working to increase market share in India and Southeast Asia. In May, as talk of the alliance spread, Ghosn said that, among Association of Southeast Asian Nations members, Mitsubishi “makes more than 7 percent operating margins. In 2015, (Nissan) had a negative margin.” As such, he added, Mitsubishi’s “position of strength is our position of weakness. In ASEAN, they can support us a lot.”
Adding a smaller carmaker to the Renault-Nissan family also dovetails with developments in autonomous-driving technology and a push toward electrification. Saving costs and sharing resources, for example, drove Toyota and Suzuki Motor Corp. to form an alliance.
Restoring consumer trust is a tall order, though, especially given options available. One question: Does a nation with three great automakers really need five or six — or even seven? Another: Why wouldn’t a consumer with trust issues concerning Mitsubishi just look elsewhere? Also, technological change adds wrinkles that didn’t exist in 2001, when Ghosn became a cultural folk hero. Mitsubishi 2.0 needs to go up against the Teslas and Googles of the world as much as fossil-fuel burning competitors. Who knows, China, too, may soon make a savvy low-cost car.
It’s a two-way street, risk-wise. The media spin that Ghosn rescued Mitsubishi misses the point that he needed it to drive the next phase of growth. Ghosn will have to be very hands-on to ensure Mitsubishi doesn’t veer off the road and slow the broader Renault-Nissan alliance down. He doesn’t want the next manga series to be titled “The Downfall of Carlos Ghosn.”
William Pesek is executive editor of Barron’s Asia and writes on Asian economics, markets and politics. www.barronsasia.com
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