What drives Carlos Ghosn, chapter 2: "Early Career"

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What's life like as a global CEO? In this special multi-part series, Nissan Motor Co., Ltd. CEO Carlos Ghosn shares his life story, offering personal insights and professional lessons on what it takes to succeed.

 

 

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On a roll with Michelin: Forgoing further studies to join the tire maker brought lessons of a different kind

One day in May 1978, at around 8:30 in the morning, I woke up to the jarring sound of the phone ringing. When I answered, the man on the other end of the line identified himself as Hidalgo.


In only his third year with the company,
the 26-year-old Ghosn was promoted to
manager of the plant in Le Puy.

"The Michelin Company in France would like to expand its business in Brazil," he said. "They need French engineers who are familiar with the local environment. Would you like to have an interview in Clermont-Ferrand?"

The catalyst for this call was my sister, who had told Hidalgo about me in Brazil. I called my sister right after I hung up. When I told her I was barely interested, she said, "It sounds like a good opportunity. Why wouldn't you take it?"

Clermont-Ferrand is a provincial city located in central France, home to the tire manufacturer Michelin. At the time, I was 24 years old. I had progressed to the second master's level of the grandes ecoles universities, earning a degree at the Ecole des Mines. I was considering entering a doctoral program in economics and hadn't thought much about starting my career.

But the word "Brazil" rang in my ears. I hadn't lived there for 18 years, but it was my birthplace and my spiritual home. My father and many relatives still lived there. The idea that someday I might be able to work at French companies in Brazil was an attractive prospect.

I took the interview. It went well -- the company was clearly interested in hiring me, and it wasn't long before they made me an offer. It wasn't easy to move from Paris to the countryside of Auvergne, but I kept telling myself, "Brazil is waiting." I decided to end the student chapter of my story to embark on a new adventure.

A hundred people entered the company at the same time. We became friendly during the three months that we lived under the same roof, taking seminars at all the major departments of the company and dining and traveling together on weekends. It was a time of personal and professional growth. Surprisingly, even though it was a training period, we often had opportunities to solve pressing company problems. Michelin often gave freshman employees the chance to suggest ideas on important issues, such as how to make production processes more efficient or how to best manage raw latex.

After general training, we moved to plant training. We cut and transported raw rubber. Mostly we were working in three shifts, including one late at night. It proved a great learning opportunity, teaching us not only about the rubber manufacturing process, but also about quality control management and how to put plans into action.

I spent break times playing cards with the veteran workers. Even though I had just come out of the grandes ecoles system, I found I was able to forge strong bonds with the workers at the plant.

After training, we were each assigned a plant. Le Puy, where large tires were manufactured, was my first assignment. I had an interest in improving productivity and toured the site many times every day. The importance of effective communication quickly became apparent to me and was reinforced every day. This wasn't something I had learned in my schooling, but it was one of the biggest lessons from my early career.

I traveled to plants around Europe and soon got my "big break." It was a global era for Michelin. Management was targeting one overseas location after another, and the company turned to a younger generation of executives. I was promoted to manager of the plant in Le Puy in my third year with the company, at the age of 26. This was recognition of my measurable success and rapid integration into the company.

Michelin was a traditional corporation in many ways, but it was also advanced. I was not a French national, but I was allowed to possess such a job title and share such responsibility with other executives at a young age. This openness was due to the personality of the grandson of the founder, Francois Michelin, a man with the highest standards and a deep interest in people.

My main challenge was to build trust and relationships with my older subordinates. I spent a lot of time cultivating teams that could solve problems together. Two years passed, and when the management of the factory was fully on track, someone appeared from the headquarters office. It was Francois Michelin himself, and he had a new opportunity to offer me.

This portion of My Personal History: Carlos Ghosn was originally posted on Nikkei Asian Review.


Turbulence and Triumph in Brazil: A Transfer Across the Atlantic Helps Me Hone My Reform Chops

The first thing you noticed about Francois Michelin was his height. What you learned by working beside him was that he was also sophisticated, dignified and polite. He was appointed co-owner of the Michelin tire company in 1955 and held that position for more than 44 years. He was much more than the manager of the family business: Michelin's globalization was a result of his acumen and ability.


Carlos Ghosn, left, after being transferred to Brazil

He offered me a job working at Michelin headquarters under Behrouz Chahid-Nourai, the chief financial officer. Two experiences would be critical to my career. The first was the development of cross-manufacturing -- a principle that would serve me well in this job and all others. This concept emerged based on my analysis of Kleber-Colombes, a tire manufacturer focused on automobiles, vans and farm equipment that Michelin had taken financial control of years earlier. The company was doing poorly, but Michelin didn't want to abandon it. Instead, Michelin absorbed Kleber-Colombes' automobile tire business as a budget brand and utilized the same production line to manufacture both brands.

Another key opportunity was the chance to work with Chahid-Nourai. He taught me the concepts and practices of cutting-edge corporate finance, including the techniques for optimizing resources. Seven years after I joined the company, Francois Michelin sent me to Brazil, which opened a big door for me.

In 1985, I was finally transferred to Rio de Janeiro, where I could be close to my parents and sisters. My family was happy about my new assignment. However, the plight of Michelin Brazil made it far less than an ideal situation. The country was mired in political unrest, dealing with a financial crisis and had, until recently, been ruled by a military regime. Hyperinflation had exceeded 1,000% a year, and businesses there were experiencing massive losses. In fact, huge debt was becoming Michelin's primary concern in Brazil.

Despite these challenges, I considered the country to be a potential treasure trove of opportunity for Michelin. Brazil's natural resources were abundant, and its enormous market potential was comparable to that of China, Russia and India.

I worked hard to implement reforms. Michelin had purchased two huge rubber plantations in Brazil. Performance had stagnated, but it was primarily due to external factors, mainly the price controls decreed by the government. I initiated negotiations with the government, trying to secure approval to raise prices. Simultaneously, we emphasized meticulous management and control of cash flow. Extreme measures were required. And while the people at Michelin headquarters in Clermont-Ferrand were frustrated, I was steadfast in my resolve. In the end, I was able to resurrect the Brazilian operations and establish segment leadership in the marketplace.

Around this time, however, the labor union movement grew more violent, and worker strikes became more frequent. One day, despite being cautioned against it by the managers around me, I went alone to a factory whose workers were on strike to hear their concerns. I did not encounter any hostility; all they wanted to do was talk.

After three years of turbulence, the Brazilian operations stabilized. Because of the strict cash flow management measures we had put in place, our subsidiary was producing great results. Trust from headquarters increased. I was 31 years old at the time. If I think about it now, my actions represented youthful indiscretion, but I believe I was right to maintain a bullish approach toward growth.

One day I received a message from Francois Michelin saying, "The old married couple would like to visit Brazil." I was grateful. The boss I trusted was watching over me. He came to Brazil with his wife in 1987. I spent 10 days with him, touring factories and plantations all over the country. He showed interest in everything and treated everyone with respect, regardless of social class or title -- a worthy leader in this era of globalization.

After he returned home, I was presented with another challenge that would reshape my career: I was to go to the U.S., a fiercely competitive region and Michelin's biggest overseas market. I was told that Francois Michelin wanted to leave everything to me. After the Christmas holidays, my young family and I left my homeland once again.

This portion of My Personal History: Carlos Ghosn was originally posted on Nikkei Asian Review.


Warm Welcome, Big Challenges in America: Lessons in Integration, and from Iacocca, in the World's Toughest Market

In February of 1989, I arrived in the U.S. to start my new assignment. My family and I would be living in Greenville, South Carolina, a small town with traces of the Old South. It was a highly religious and welcoming place, and we basked in the warmth of southern hospitality.


Carlos Ghosn said his family was treated to
"Southern hospitality" in South Carolina.

When I got there, we were a family of three. Our second and third daughters, and our first son, would be born in the U.S. It was a happy time in my life, not only because of our growing family but also because of the rewarding work. My mission was to lead Michelin's acquisition of Uniroyal Goodrich, a major U.S. tire company, during a time of economic downturn.

At the time, the U.S. had the biggest auto market in the world, and Michelin had to establish a strong presence if we wanted to be a contender. I felt considerable pressure from headquarters, and competition was fierce. Goodyear, a U.S. company, was the industry leader in tire manufacturing, and Japan's Bridgestone had just acquired the legendary U.S. brand Firestone. Michelin had no time to waste.

The acquisition of Uniroyal was approved in the early 1990s, and we faced some problems right away. Uniroyal had a large inventory of old equipment and had not invested in replacing key parts, making production slow and inefficient. Under the terms of the acquisition agreement, Michelin had negotiated the closures of three plants in North America, which was met with heavy criticism. We simply could not afford them. This earned me the nickname "The Cost Cutter." But I didn't mind -- I knew cost-efficiency was the pathway to recovery.

Cost cutting was only part of the strategy. We also needed to fully integrate the business to achieve maximum synergies. To do this, I created an executive committee composed of the most talented people from Michelin and Uniroyal. This would be the first, unsophisticated, model of the "cross-functional team" utilized with success in the Nissan Revival Plan a decade later.

The fusion of cultures was the first big challenge for Michelin. As a provincial company from France's Auvergne region, its way of doing business was different than that of U.S. companies. If we wanted to leap forward as a global company, the U.S. focus on short-term profit would need to come together with the European family-owned management style, which focuses on long-term results. We made a number of other operational changes: We adopted a multibrand strategy in North America, in which we assigned Uniroyal to the main battlefield of the aftermarket, where brand power was more important than in the original-equipment marketplace. But we kept Uniroyal's head office at its traditional headquarters in Akron, Ohio.

This was a time for me to personally learn by doing. In Brazil, I had battled against the government to raise prices, but in the U.S. I battled rivals in the market. Competition was everything.

We had meaningful successes. Uniroyal was one of the most significant suppliers of tires for what was then the world's largest carmaker, General Motors. GM was a generous company and willingly accepted the takeover by Michelin. We were also able to establish contact with Japanese automakers. I traveled several times to the North American plants of Toyota Motor, Honda Motor and Nissan Motor, including Nissan's plant in Smyrna, Tennessee. Japanese carmakers were on a roll at this time, and I had a feeling that they would climb to the top of the world's automotive industry, and soon.

I also learned a great deal about leadership. There were many impressive leaders in the automotive industry, including Lee Iacocca and Robert Lutz, who left Ford Motor for Chrysler and served as vice president under Mr. Iacocca. Lutz was an open-minded man. I invited him to a seminar at Michelin, and he told the crowd: "Before, I couldn't imagine who would buy a Chrysler vehicle." I was shocked he would say something like this at first, but I realized that he was a master of communication. He told it like it was and didn't use fabrications or flattery. I could tell the audience was impressed. To be honest, so was I. He was an important influence on my leadership and communication style, and we have stayed in contact over the years.

In short, things in the U.S. were going very well. Then I received a call from Francois Michelin. He was sending his son to come work for me.

This portion of My Personal History: Carlos Ghosn was originally posted on Nikkei Asian Review.


On to a New Adventure at Renault: After 18 Years at Michelin, I Accept an Offer to Help Revive the French Carmaker

Edouard was the youngest son of Francois Michelin. When he arrived to work for me, I put him in charge of our critically important truck-tire manufacturing and sales departments. His good manners and respect for U.S. customs earned him an excellent reputation among his colleagues.


Carlos Ghosn at a Renault plant

Because Michelin was a family-owned business, it was assumed that Edouard would succeed his father. As such, I never expected I would reach the very top of the company – I did not have the right last name.

In 1996, after about seven years of working in the U.S., there was a major restructuring of the business. I was put in charge of our global tire operations for passenger cars and small trucks, and served as the president of the North America office. Essentially, I had climbed to the No. 2 position.

But would I be happy to stay in that position forever, knowing I couldn't climb higher? I wasn't so sure. So when I received a call from a headhunter, an alumnus of the Ecole Polytechnique, I agreed to meet. Over dinner, he asked if I was interested in the automotive industry. Renault was looking for a No. 2 who could eventually rise to be the top executive. He arranged a meeting between me and Renault Chairman Louis Schweitzer.

At 8 a.m., I met with Schweitzer for an hour and a half at Renault headquarters in Boulogne-Billancourt, a suburb of Paris. He mentioned that the company's second-in-command was about to retire, and he was looking for a potential successor. He said I was their top candidate.

My main motivation for taking the job at Renault wasn't the prospect of one day running the company. Rather, I was interested in the opportunity to study new things and take on new challenges. I had always been interested in cars and complex products that required teams of people and supply chains to work in close coordination.

After a board meeting, I notified Francois about the meeting with Schweitzer and my intention to leave Michelin. For a moment he seemed surprised, but then he said simply, "Please let Edouard know."

After 18 years at Michelin, my heart was heavy at the thought of leaving -- both the company and Francois. I have always remembered the strength of his vision, his humility and the sincere kindness he extended to me. In fact, he was one of the first to recognize the power of Japanese companies on his own.

Many years later, I was reunited with him at Renault. He asked how I was doing, and I told him I was well. He resigned in 1999, and Edouard, as expected, took his place. Francois Michelin passed away in 2015 at the age of 88. There is a lot of him in me.

This portion of My Personal History: Carlos Ghosn was originally posted on Nikkei Asian Review.

 

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