Can Infiniti recreate the Audi miracle?June 27, 2012: 10:55 AM ET
Nissan certainly hopes so. That's why it lured the genius behind Audi's comeback to fix its perennially lagging luxury division. Question is, can he really do it again?
By Doron Levin, contributorFORTUNE -- By poaching the head of Audi in the U.S., Nissan Motor may finally have found the key executive to lead the turnaround of Infiniti, the Japanese automaker's perennially lagging luxury division.
Johan de Nysschen, who ran Audi in the U.S. for the last 19 years, was recruited by none other than Carlos Ghosn, Nissan's magnetic CEO. De Nysschen will run Infiniti worldwide from its new Hong Kong headquarters. Not surprisingly, a big part of his mission to make Infiniti relevant in the world's biggest automotive growth market, China.
That Ghosn would pluck somebody for the German automaker is not much of a surprise. "Infiniti has had 'Audi envy' forever," said Michelle Krebs, automotive analyst for Edmunds.com, an automotive website. "Audi is the younger, hipper brand that Infiniti has wanted to be. Audi also was the upstart among the more successful German luxury brands," just as Infiniti has been an also-ran to Lexus, Toyota's luxury division.
Reviewers have often rated Infiniti models highly, though no one at the franchise has ever been able to unlock the intangibles of prestige and desirability that motivate well-heeled buyers to pay the same high prices captured by Mercedes, BMW, Audi and Lexus. Infiniti marketing has careened from forgettable to incoherent.
Enter De Nysschen, who led the resurgence of a troubled Audi after predecessors floundered. He led a methodically planned and executed renaissance of the brand in the U.S. which is likely to be a case study for future automotive executives. Though in its native Europe Audi has long been seen in league with BMW and Mercedes-Benz, in America its perception until recently lagged. De Nysschen was the architect of a grand strategy that remedied that.
De Nysschen is known as a tenacious and uncompromising manager, not necessarily a favorite of U.S. dealers. For instance, dealers routinely demanded more Audis and different models than what the company was willing to supply. But Audi, under De Nysschen's guidance, has determined to control scarcity and growth meticulously so as to maintain the brand's prestige status and avoid the discounting that has hurt franchises like General Motors' (GM) Cadillac and Ford's (F) Lincoln.
During a six-year period in the late 1980s, Audi's sales in the U.S. plunged more than 80% amid accusations that its flagship Audi 5000 was prone to unintended acceleration. The accusations were never confirmed, though Audi added some safety features as a result and changed the placement of foot pedals that were thought to lead some drivers to assume their foot was on the brake rather than the accelerator.
After hitting rock bottom in the early 1990s, Audi sales slowly began to recover. But the franchise didn't really take off until 2004 to 2005, when De Nysshen and his team changed the business model, reducing the number of units available. He also did away with deep discounts in the form of incentivized leases. Pricing and prestige improved, which eventually brought more buyers to showrooms and lifted sales. A raft of well-timed new models didn't hurt either; Audi unveiled a series of glitzy new vehicles that culminated in the 2006 release of the R8, a steroidal sports car that seemed a capstone on the brand's turnaround.
A native South African, de Nysschen sent an email to Audi employees earlier this month denying that his departure was related to a broad and simultaneous shakeup across VW and in Audi's top management in Ingolstadt, Germany. Fellow Audi executives more or less ratified the amicable departure by presenting him with a ceremonial steering wheel from an Audi A4, which had owned early in his career.
What's clear is that Nissan and VW have both set ambitious growth targets over the next few years, which presume much higher luxury sales. Audi has said it wants to sell 200,000 vehicles in the U.S. by 2018, up from 117,561 last year, a 16% gain from 2010. Infiniti intends to more than triple its global sales by 2016 to half a million from about 150,000 worldwide last year.
Infiniti's most important market for now is the U.S. – but China could be tops, as it is currently for Audi. Infiniti plans to start manufacturing two Infiniti models in China in 2014 with a Chinese partner.
But there is another wrinkle. De Nysschen's exit from Audi, Volkswagen's luxury brand, opened the way for the promotion of Scott Keogh, a one-time Mercedes executive, who will face the task of building upon De Nysschen's impressive stewardship of a once troubled brand. Now, De Nysschen and Keogh are bound to be imagining one another's next moves -- even as they try to fulfill their own ambitious sales goals.