The main reason behind the problems at Nissan is the system of operation. According to Carlos Ghosn, CEO of Nissan, Japanese traditional management style is one of the issues behind Nissan obstacle. The main issues are employees lack urgency, collectivism, long-term fixed employment, the Keiretsu system, and the resistance of adapting to changes.In the 1990s, the massive Japanese carmaker company, Nissan was in crisis as it had failed to produce profit, left alone reduce debt.The company failed to bring costs under control, and sales had been dropping year by year. It was clear the company management couldn’t go on for much longer as the company was edging towards bankruptcy.
The basic flaws of Nissan are the working environment, employees are reluctant to accept failure individually. Having a collective system, employees did not encourage to accept failure by themselves, instead, they point out the department or current economic condition are responsible for them. It results in an uncompetitive working environment where employees assume someone will take action, which ends up non-action had been made. Furthermore, individual resisted working in a cross-functional team as well. Working with the outsider seems to be unfamiliar to the employees and they are reluctant to change or adapt to the new environment.
Cutting cost became company priority. To success getting rid of Keiretsu system, the seniority-based promotion, and long-term fixed employment is essential. Having Keiretsu system can be a burden on the bigger companies, Nissan before the reign of Carlos feel obligated to use keiretsu suppliers despite the fact that production costs can be cheaper from individualized suppliers in the global market. Moreover, the seniority-based promotion creates a box shape figure where older higher-ranking workers become a big proportion of the company. The healthy company hierarchy figure should be a pyramid shape, which higher pays remain a small portion. Combined with long-term fixed employment where company tends to hold on their employees as long as they can, even the fact that it is unhealthy financially for the company, to put the cost under control is extremely difficult.