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Nissan's Ghosn Heads to Opryland for Cost-Cutting: Doron Levin
2005-12-12 00:26 (New York)

(Commentary. Doron Levin is a Bloomberg News columnist. The
opinions expressed are his own.)

By Doron Levin
Dec. 12 (Bloomberg) -- Some people head to Opryland to get
in touch with their roots. Carlos Ghosn, Nissan Motor Co.'s
chief executive officer, is heading there in search of cost-
cutting.
He's doing it by moving Nissan's U.S. headquarters to
Nashville, Tennessee, a city better known for making country
music than cars. Nissan now has its home in suburban Los
Angeles.
Ghosn's case for the move to Nashville, which will start
next year, is simple: The city is centrally located and thus
closer to more Nissan dealers and customers in the U.S. than Los
Angeles, one of the country's most expensive places to do
business.
According to the Milken Institute Cost of Doing Business
Index, California ranked fourth-highest in business costs among
the 50 states in 2005, about 24 percent higher than the national
average. Tennessee placed 39th, about 14 percent below the
average. The index measures wages, taxes, electricity and real
estate cost for industrial and office space.
Prosperity hasn't made Ghosn (rhymes with ``bone'')
complacent. He led Nissan's improbable turnaround in the late
1990s by confronting such Japanese sacred cows as lifetime
employment and the keiretsu system of favored suppliers.

Penny Here, Penny There

Moving to Nashville probably would achieve savings on a
relatively small scale for Nissan, which like any major car
maker has billions of dollars invested in factories scattered
around the globe. There also are the risks of losing some key
people and potential disruptions. Ghosn obviously figures it's a
chance worth taking to make a point, if nothing else.
He's already proven that shattering long-held beliefs about
what does and doesn't work in automotive management can be
therapeutic. Is it any wonder that Bill Ford Jr. tried to
recruit him to run beleaguered Ford Motor Co.?
Or that his name is routinely mentioned as precisely the
type of innovator that Detroit needs to lead a reorganization of
outmoded, high-cost manufacturing methods?
Robert S. ``Steve'' Miller Jr., Delphi Corp.'s chief
executive since July, is the closest thing Detroit has to Ghosn.
Miller, who took Delphi, General Motors Corp.'s former parts
subsidiary into bankruptcy in October, is proposing to cut union
wage scales roughly in half in a bid to avoid shutting U.S.
factories and firing workers.

An Image Makeover

Nissan already has carmaking and other manufacturing
operations in the state, employing about 8,000 people, so this
isn't exactly terra incognita for Ghosn. And any savings in cost
is all for the good.
Tennessee, quite understandably, is tossing big money at
Nissan. The automaker will get as much as $197 million in tax
breaks and other benefits, reflecting the value of the high-
paying jobs, as well as the image boost for a city that aspires
to become a business hub.
The $70 million headquarters Nissan intends to build in
Franklin, 15 miles southwest of the city, should be covered by
the value of the 43-acre campus the company owns in Gardena,
California, now for sale.
And in case Nissan's U.S. managers and executives think
Ghosn is singling them out, he's also moving the parent
company's headquarters in Japan to less costly Yokohama from
nearby Tokyo by 2010.
``Mr. Ghosn has pointed out that when you're doing well,
that's the time to make changes, not when you're in a
downturn,'' said Jim Morton, Nissan's senior vice president-
administration and finance for its U.S. sales unit.

Behind Toyota and Honda

Unlike Nissan's competitors in Detroit, the automaker is
flourishing, with five straight years of solid profits and a
10.3 percent increase in unit sales of vehicles in the U.S. so
far this year. Nissan is the third-largest Japanese automaker,
in terms of U.S. sales, after Toyota Motor Corp. and Honda Motor
Co.
Ghosn clearly foresees that the low-cost advantage of
producers such as Nissan over GM and Ford is likely to narrow if
the latter can lower labor expenses and eliminate excess
capacity. Besides, Nissan has to worry about Toyota and Honda,
which are just as devoted to cost-cutting as Nissan, if not
more.
So far, according to Morton, about half of Nissan's 1,300
white-collar workers have indicated in a survey that they intend
to move to Tennessee. That could be a problem for Ghosn, though
he probably will lose a few he doesn't want anyway and then
cherry-pick talented replacements from GM and Ford, which are
shrinking in size due to falling sales and market share.
In terms of chic, the Grand Ole Opry, a theater inside the
Opryland theme park, where the late Johnny Cash once belted out tunes, doesn't rise to the level of Hollywood and the annual
Academy Awards ceremony. And it doesn't matter a whit to the
Brazilian-born Lebanese auto chief who was schooled in Paris.
When it comes to saving money and keeping Nissan
competitive with the likes of Toyota, Ghosn isn't missing any
chance to gain ground -- even if some Nissan workers may be
trading their surfboards for cowboy hats.
 
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