In May 2001, just 12 months after reporting its biggest loss ever, the Nissan Motor Company reported the largest net profit in its history. This turnaround, announced by Nissan’s president and chief operating officer, Carlos Ghosn, made good one of the boldest promises ever pledged by a corporate executive. Mr. Ghosn had said he would resign if the automaker did not report an operating profit in the fiscal year ending March 31, 2001. Mr. Ghosn made this dramatic pledge shortly after Renault announced that it had chosen him to run the company, in June 1999. The French automaker had purchased a controlling 36.8 percent interest in Nissan that March.

Mr. Ghosn’s change-management challenge at Nissan—and the approach he took to the company’s 19-month turnaround—is of great interest to top managers and academics alike. The former Michelin and Renault executive, best known for his cost-cutting skills, was trying to do more than restructure a respected but money-losing industrial giant. He was doing so in Japan, where social convention limits one’s flexibility in making big, fast cost reductions. Moreover, he is a foreigner, one of the few to lead a Japanese company.

In these excerpts from an interview—conducted by Allan Gold,...