Nissan COO Carlos Ghosn drops a bombshell on the eve of the October Tokyo Motor Show, outlining the revival plan for his ailing company. EVP Patrick Pelata lists the 10 cardinal sins of Nissan management and products at a new vehicle launch.

Patrick Pelata, formerly an engineering executive of Societe Anonyme Renault and now Executive Vice President of Nissan Motor Co. in charge of product planning, admitted as much, saying he was "in a strange situation." In a gala-like setting in a plush Tokyo hotel, Pelata was there to introduce to the media audience a new minivan, the Bassara, a vehicle whose development, noted Pelata, had been "decided before the arrival of (Chief Operating Officer) Carlos Ghosn and myself at Nissan."

Instead of going straight into praising the new product, Pelata bluntly stated that Nissan's products suffered "insufficient appeal." For this most grievous fault, Nissan has paid tremendously, losing a quarter of its worldwide market share since 1991.

Pelata continued, citing 10 causes for this lack of product appeal:

• The first and obvious one is restricted investment, due to a lack of cash, which had led to the cancellation of important, interesting projects.
• The second: Nissan's decision-making process was not clearly profit-oriented, further worsening the inaction caused by the first fault.
• Thirdly, Pelata declared that brand management simply had not existed as a corporate function. Some tentative definitions were formulated, but without the whole company "100% consistent on them," they were not understood by the designers, engineers, and marketing people.
• The fourth fault was that the company was not market-driven. "This is both a question of organization and a question of culture. If you always let constraints of engineering, of resources, of production, of timing decide your product plan, and if on top of that, you are not well organized to listen to the market, you are not market-driven and the customers can see it," said Pelata.
• The fifth has been one of Pelata's major concerns, he said, from the onset of his assignment at Nissan: There are many highly technically competent people within the company, but there is also "a big lack of professionalism about product planning and marketing."
• The sixth was design—styling. The lacking of Nissan products has been blamed on design. The designers' creativity is not at issue, said Pelata, but the organization, its dependance on—bordering subordination to—engineering, and the lack of direction were adversely affecting design performance.
• The seventh is an interesting one, in Pelata's view. "All about this feeling of perfect achievement of good craftsmanship that you get when you look at a car, sit in it, touch it, smell it, and so on. That is what we call perceived quality," he said. He went so far as to cite two benchmark brands, Mercedes-Benz and Audi. He recognizes Nissan's excellent product reliability, but wants to work harder to attain that elusive, perceived quality.
• The eighth: Pelata pointed out that Nissan, renowned for its outstanding powertrain engineering, committed a big mistake installing "appropriate" engines in its products, be it the G20, the Altima, the Terrano (Pathfinder) SUV, down to the Micra mini. It would take a long time, as long as nine years, to install a V6 in the Altima (so one must be on the way).
• The ninth is a delay between the Japanese and overseas launches of the same or similar models, ranging from one to sometimes two years. Pelata said it wasn't consistent in the era of Internet and instantaneous communication.
• The tenth is an obvious lack of mid- and long-term strategy, which led Nissan to contradictory or inconsistent short-term decisions.

So what are the new managment's programs to remedy and overcome those grievous causes of the old Nissan's unsatisfactory performance? Pelata explained:

• The first: Investment in R&D will grow from 3.5 to 5% of turnover, concentrating on new products and new engines.
• The second: Ghosn announced on Oct. 18 of last year that to enhance cross-functionality and profit-orientation, six program directors had been appointed. They are responsible for worldwide profitability and market share of their respective projects, which should achieve lower cost and better value. This would be enhanced by step two: the nomination of project directors. They will be fully dedicated to "product attractiveness."
• The third: An international task force led by Pelata is working on setting up a specific organization, in the first half of 2000, to concentrate on brand management.
• tem four: product planning. Worldwide organization of product planning will be vigorously pursued. A senior vice president was appointed to organize concerted efforts in engineering excellence, safety, build-quality upgrades, attractive equipment, and accessories.
• The fifth: Improvement of professionalism in marketing, sociology, ethnology, and business acumen in the product-planning area.
• The sixth: Design is now an independent unit. The sign-off of new products destined for the U.S. and Europe are now done by Nissan's American and European designers, which started in August 1999. Nissan became the first Japanese company to recruit its design director from outside. After some searching, Shiro Nakamura, formerly the Design Director of Isuzu, was selected to head Nissan Design. The advice of Renault Vice President Patrick le Quement was sought in the selection, according to Pelata. Le Quement himself had occupied senior design positions at Ford and Volkswagen before coming to Renault, where he is credited for the French manufacturer's design renaissance.
• The seventh: planning to improve "perceived quality" is under way. Pelata is confident that Nissan's basic strengths will enable the company to achieve excellence.
• The eighth: New engines are on the way, especially those urged by the overseas marketing arms. They include a lightweight, compact VQ family V8 engine for the forthcoming Infiniti Q45 replacement, which will once again be a full 4.5-L unit.
• The ninth: Nissan is aiming at a very short delay between the launches of a new model in Japan and other markets, its target time being a mere three months.
• COO Ghosn's earlier announced Nissan Revival Plan is the tenth command, outlining Nissan's short-term strategy over two years, during which five plants will be closed, the workforce reduced by 21,000, and the number of the company's suppliers almost halved. Mid- and long-term strategies are forthcoming, according to Pelata.

That was a heavy clobbering of the old Nissan by the new EVP. In a later press meeting with Ghosn and Pelata, AEI's Asian editor had to remind them that it would take at least 18 months to a good two years to conceive, design, develop, test, and produce any really new models and make them available on the market—maybe much longer if Nissan intends to launch such models simultaneously or with minimum "delay" to the world market. In the meantime, Nissan would still have to rely on what it has now, which had been designed and developed by the old, beleaguered company.

Pelata must be an honorable executive, but wouldn't his blatent criticism of his own company invite the alienation of its customers who own Nissan vehicles, and worse yet those who might have been considering buying them? Pelata responded, "I had to tell you what improvements are to be made, so we could not simply say everything was okay. It was quite a difficult trade-off."

In his own presentation of the 10 causes, he conceded that his generalization might not be completely true (of all Nissan products.) Perhaps he did not want that Shakespearian wisdom that the evil that men do live after them, the good oft interred with their bones to prevail. So he elaborated on some of the good: the fond memories of the 240X and 300ZX, and other good and some superb cars such as the first Pathfinder, Micra/March, the original Primera (G20), and the first Sunny in Asia. He praised later and current models such as the Maxima/I30, the small Cube concept, and the latest Cedric/Gloria executive sedan twins. He recognized that these cars and vehicles demonstrated that Nissan's engineering capability is still there, but "it has just been misused."

Asked of their favorite Nissan car, Ghosn and Peleta included the fearsome Skyline GTR coupe, an ultra-high-performance, limited-production model. It is strange, then, that this car, derived from an inflexible (it could not be converted to left-hand-drive, thus is confined to Japan) rear-wheel-drive platform, which has not been profitable, and is destined for extinction together with its rugged but old inline six-cylinder engine and the Murayama plant where it is made. Pelata assured, however, that there would be a future GT-R based on the new FR-L platform.

Jack Yamaguchi

AEI March 2000