Smiling broadly and looking dapper in a powder blue shirt, pin-striped suit and bright red tie, Renault CEO Carlos Ghosn doesn't look like your typical corporate hatchet man. Back in 1999, however, Ghosn was dubbed the "samurai" and "cost killer" at Nissan Motor in Japan. As the newly appointed president, he began closing plants, slashing more than $20 billion in debt and eliminating 20,000-plus jobs to return the moribund company to profitability. Many observers--especially France's sometimes intractable unions--expected similar tough love in early February, when Ghosn unveiled his ambitious four-year plan for the European auto giant, which has had an increasingly close joint partnership with Nissan since 1999. But, quelle surprise, so far Ghosn's quality-enhancing, production-boosting, profit-focused project has avoided layoffs. "Renault is not in the same critical situation Nissan was, so the methods we're using to improve things are different," says Ghosn during an interview at Renault's Boulogne-Billancourt headquarters on the southwestern edge of Paris. "We're confident this plan will be successful. But if not, we'll assume the consequences. Everyone knows exactly what's at stake."
In the auto industry in particular--still the bellwether for a globally successful manufacturing sector in many European countries--managers have had to make tough choices that have proved politically controversial. In Europe, unions still have considerable political power, not to mention seats at the board of directors table. DaimlerChrysler has said it is looking for a reduction of 14,500 jobs at Mercedes, while Volkswagen in February announced 20,000 job cuts. In such an environment, Renault appears to be defying gravity by promising ambitious results without the pain of slashing labor costs. Indeed, Ghosn is pledging to increase annual car sales by 800,000 units by 2009, double operating profit margins and improve product and brand quality. "The lesson of the Nissan revival plan was, What's vital is the result, not the precise means of attaining it," says Ghosn, 52. "We've analyzed the opportunities and potentials at Renault and made clear commitments on the results we'll deliver." The end result, he predicts, will be the "most profitable European volume car company."
Ironically, that will mean shifting away from the European market. Renault, founded in 1898 and beloved by the French for its innovative designs and reliable cars, remains profitable with a 2005 net income of $5.39 billion, making it the third largest car manufacturer in Europe. But when Ghosn was named CEO last April, he inherited slowing European car markets, dated production and management systems and some dud car models such as the Vel Satis luxury car. With Renault sales in Western Europe dropping 7.3% in the second half of 2005, group operating profit margin shrank from 5.2% to 3.2%. Ghosn was forced to issue profit warnings for 2006 and indicated that 2007 would be slow too.