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Will the Ghosn Takeover of Mitsubishi Succeed?

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On December of 2016, Carlos Ghosn became the new Chairman at Mitsubishi Motors. This came at a time when Ghosn was literally a folk hero in Japan and a respected figure in the automotive industry, while the reputation of the Mitsubishi brand has taken a drastic tumble. How will this new partnership work, and where is it headed?

To see the future, we can investigate the clues in the past, and we start with the past of Carlos Ghosn.

Who Is Carlos Ghosn?

In 1999, Carlos Ghosn was just the executive vice president of French carmaker Renault. Then he arrived in Japan, with the mission of rescuing Nissan Motors from all its grave problems. That Ghosn was chosen for this mission surprised many because he wasn’t just a gaijin. He was a gaijin whose personal history was very different.

Ghosn is Lebanese, but he was born in Brazil. He then spent his high school years in Lebanon. He went to university in France, where he eventually acquired his French citizenship. He has also lived many years in the US, and his children still live there.

How Ghosn Saved Nissan

Ghosn was not Japanese, and perhaps it was this quality that led to his success in Nissan. He simply implemented various tactics and methods that were common in the West but were considered unthinkable in Japan. He started with overhead cuts, at a level that would be considered rather vicious and ruthless. By 2001, he had removed weak affiliates, closed down factories, and terminated workers numbering in the tens of thousands.

Then he initiated systems of promotion and compensation based on merit. This was a shock to the Nissan culture, which like most Japanese companies were at the time based employee advancement on seniority. This forced the employees to perform, as their long years of service to the company were no longer enough to keep their positions safe.

Ghosn also wielded a mighty axe at the entrenched Nissan bureaucracy. He eliminated most of the intermediary job positions, which had job titles that included terms like “assistant” and “deputy”. This resulted in a more efficient creative process. Executive vice presidents got to hear about new designs and ideas much more quickly.

He then formed the revolutionary Renault-Nissan Alliance, as Ghosn became head of Renault in 2005. This new partnership became a leading player in the auto industry. The benefits of the partnership were quite apparent, as development ideas and costs were shared.

The Mitsubishi Challenge

Now the addition of Mitsubishi makes this the Renault-Nissan-Mitsubishi alliance. Ghosn is now the chairman at Mitsubishi, as he is also the chairman and CEO at Renault and Nissan.

Turning around the problem-riddled Mitsubishi brand may be Ghosn’s greatest challenge. The car company has been rocked by its own false fuel scandal, just as Volkswagen has been. Executives from the company have admitted that they have filed numerous fuel economy figures for various models sold in Japan. Sales of 8 models were suspended when the trade ministry discovered that the released efficiency data were off by almost 9 percent.

This scandal is just the cherry on top of all the Mitsubishi sales and revenues problems. The brand has gone stale. Its most exciting car was the Mitsubishi Evolution, and the company has discontinued it.

What’s more, the world is very much different than it was in 1999. Technology has progressed since then. Also, the problems are global. The Brexit results have affected the alliances presence in the UK market. Trump, who surprisingly won the US presidential elections, has been fueling worldwide uncertainty with threats of trade wars and protectionist policies. There’s also a problem at home, as car sales in Japan have been weakening.

The Takeover at Mitsubishi

The takeover has begun at Mitsubishi, and it started with personnel changes. He plans to add 3 Nissan reps to the Board of Members at Mitsubishi. Several Mitsubishi top executives have already resigned. Nissan has also put in one of their best former R & D chiefs to work at Mitsubishi.

Nissan has also taken a controlling stake at Mitsubishi Motors. Their 34% stake makes them the largest shareholders in the company. Nissan has also injected $2.3 billion in additional capital.

However, the addition of Mitsubishi to the alliance makes them the 4th biggest carmaker group in the industry. Only Volkswagen, Toyota, and General Motors are bigger. According to consultancy LMC Automotive, the new alliance may even overtake Toyota for the #2 position by 2023. LMC predicts that the French-Japanese partnership will be producing 12 million light vehicles by that year, while Toyota will only make 10.8 million.

The new partnership can help in the drive in the EV field and in the development in autonomous driving tech. Costs can be saved and resources can be shared.

So will Ghosn succeed? The automotive world is watching if the legendary “cost killer” can weave the same magic as he did many years ago. In the end, time will tell.

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