After French carmaker Renault took a controlling stake in Nissan in 1999, it sent Carlos Ghosn, a Brazilian-born, 47-year-old expert in corporate overhauls, to Tokyo to try to save the ailing Japanese carmaker. Ghosn has since done the unthinkable and instituted the most dramatic makeover yet at a Japanese company -- turning the industrial icon from a debt-ridden basket case into a profitable business. Along the way, the foreign boss has become something of a business role model and fashion icon -- salarymen mimic his sartorial style and his eyewear. He spoke recently on two occasions to TIME Tokyo bureau chief Tim Larimer. Edited excerpts:

TIME: What about Japan has surprised you?
Ghosn: I had a very vague image, although a positive one, of Japan. But I considered it important not to start work with any preconceived ideas. So I had to erase what I thought I knew about the country and start from zero. What struck me was how much people questioned the state of the economy and the country itself. The second thing that surprised me was the strength and the quality of what Japanese call "gaman" -- which means perseverance and is the base of Japanese society. The involvement, the loyalty, the intensity that people show for their company is amazing. It is certainly the strength of Japan and it will continue to be in the future.

TIME: What has been the hardest thing to change about the way a Japanese company works?
Ghosn: Limiting myself to Nissan -- because I'm sure Sony or Honda don't have the same problems -- I would say establishing or restoring a sense of emergency. And I'm not just talking about making decisions quickly; I mean acting fast and showing results quickly. That's been the most difficult thing to do.

TIME: Can you provide an example?
Ghosn: At the beginning of 1999 we were $22 billion in debt. Markets were declining globally, and it was nearly impossible to make a profit for eight years. There was only one year when we did make a profit, but it was not very significant. Yet there was no sense of urgency or alarm. For so many years changes needed to be made, but no one made them. That's why my first task was to instill a sense of urgency. What we have done at Nissan has not really been revolutionary. But we have been tenacious, we have put the right people in charge, and people are now accountable.

TIME: The conventional wisdom about Japan is that people here are resistant to change of any kind.
Ghosn: A lot of things characterize Japanese people in general. We can debate them. But one characteristic we cannot debate is that they are very pragmatic. They are also very sensitive to reality. And the reality of Nissan was not hidden. It was crystal clear. Something had to be done.

TIME: As a foreigner, what did you have to do to bridge cultural gaps at Nissan?
Ghosn: When you go to a country that is not your own you have to be prepared to live and adapt to that country. It should be an enjoyable experience and a learning one. I came to Japan with a lot of interests, a strong will to learn, and with a lot of respect for the country and its people. I didn't come with a preconceived plan. I came with a clean sheet of paper. Did I have to do some artificial things to adapt? No. I have been living in an authentic way. And I like it. I'm also trying to learn Japanese, not because I have to, but because I would like to. Living in a country without understanding the language is miserable. I'm doing things here because I want to.

TIME: In the 1980s everybody wanted to copy the Japanese way of doing business. That seems kind of ridiculous now. What happened?
Ghosn: Twenty years ago, Americans adopted the best practices of the Japanese system to their industries. The result was great; their car industry, for example, rebounded. Part of the turnaround came about because Americans redefined themselves and didn't care where ideas came from.

TIME: What went wrong at Nissan and other Japanese companies?
Ghosn: Nissan was not performance-oriented enough. And I think in a way companies like Nissan lost focus on what could make them successful. Another reason why Japanese companies have struggled is poor cross-functionality. Engineers did their own thing, designers did their thing, the marketing team concentrated on their work ... no one worked together. This was a major handicap.

TIME: It used to be that everyone thought Japan's kereitsu system [a network of interlocking and interdependent firms] was a brilliant business model. Not anymore. Why?
Ghosn: The kereitsu system can be very effective if it is performance driven. But it did not serve a purpose anymore at Nissan.

TIME: O.K., you have run companies in both Japan and the United States. Who works harder: Americans or Japanese?
Ghosn: I have worked in many countries -- in Europe, Brazil, the U.S. and now Japan -- and I would say both Americans and Japanese work hard.

TIME: That's very diplomatic.
Ghosn: I won't duck the question, though. There is a slight difference: the "gaman" (perseverance) shown by frontline Japanese workers is very impressive. They're dedicated and capable of working very hard. I would position them as among the best workers in the world. Then again American executives work harder than their counterparts in Japan, probably because in the past there were more personal incentives tied to the performance of the company. So I would give a plus to frontline Japanese workers and a plus to America for its executives.

TIME: The stereotype holds that Japanese are more loyal to their companies while Americans are out for themselves. True?
Ghosn: Yes. The Japanese are extremely loyal and always put the company's interests ahead of their own. I wouldn't say Americans are not loyal; but their personal interests are just as important as those related to their company.

TIME: What about Japan's consensus-style of management. Is it good or bad?
Ghosn: It's very good. But I make a distinction between active management and passive management. The passive style is a killer: it takes a lot of time, which some people think solves all problems, but usually it makes problems worse. Consensus in my view doesn't have to be 100%; it can be 85%. Whenever we think a critical mass of employees is convinced, we go ahead. What I've seen at Nissan is passive consensus. We are trying to change that.

TIME: You've taken on Nissan. What about the rest of Japan? What would you advise the Prime Minister to do?
Ghosn: Well, I am not an arrogant person. I am in charge of a company, not a country.

TIME: Aw, come on!
Ghosn: O.K. You have to listen deeply, and not only to people reporting to you. You need to go deep into the organization. Second, act quickly. When you make a diagnosis, take action. Third, empower as many people as possible to make decisions. Finally, communicate a lot. Communicate not only what you are doing, but the results, too. Then reward people. Finally, lead.

TIME: That's a lot for a Prime Minister to take in.
Ghosn: This is not my advice to the Prime Minister of Japan. These are just the conclusions I've reached after running one of the major blue-chip companies -- one that has struggled -- in the country.

TIME: We've talked about things that don't work in Japan, and at Nissan. But what practices have you found that you like and would take back home?
Ghosn: The sense of simplicity -- in strategies, in action plans, in processes. That's one of the basic strengths of Japan. Another aspect I admire is the attention to detail, to quality, that is inherent in Japanese culture.

TIME: Should Japanese companies be given up for dead, or can they come back and compete in the global economy?
Ghosn: Can they compete? Without a shadow of a doubt! Japanese companies that adopt the world's best practices will become formidable competitors.

TIME: What's your take on the Japanese salaryman?
Ghosn: They're dedicated and disciplined performers looking for clear leadership.

TIME: The Japanese public seems to like you. They even want to copy your fashion sense. What do you make of that?
Ghosn: There have been a few inquiries about [my style], that's all. Japanese people like to learn; they appreciate know-how. So when they think there is something to be learned, they study it well. There is a lot of curiosity over what we are doing at Nissan, and how we're doing it.

TIME: It's kind of gloomy in Japan these days. Do you find people to be in a state of depression? Do you find them anxious?
Ghosn: In 1999 there was a high level of anxiety and preoccupation with the future. Today, I don't see that. At Nissan, for instance, things have changed a lot. People are regaining their confidence.