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Nissan moves to put its house in order, but big challenges remain

Murali Gopalan | Updated on October 24, 2019

French car maker Renault Chairman Jean-Dominique Senard   -  ERIC PIERMONT

Nissan Motor CEO Makoto Uchida   -  KYODO

Carlos Ghosn’s trial will also be watched keenly as the Japanese automaker rebuilds bridges with Renault

It was almost surreal to visit the Nissan pavilion at the Tokyo Motor Show on Wednesday.

The one big missing piece this year was Carlos Ghosn, its former Chairman, who was among the biggest draws at this event over the years. Today, he is under house arrest in Tokyo and awaiting trial for a whole lot of serious allegations. Whether he will end up spending time in jail or emerge a free man is the million dollar question.

Beyond Ghosn, Nissan has been in the news for all the wrong reasons in recent times which have lead to a complete top management overhaul. It is not in the best of shape financially and has announced a series of restructuring moves for the future which will include over 12,000 job losses across the world (with over 1,700 in India alone).

The bizarre thing is that the world of Nissan began imploding after Ghosn’s arrest last November. His successor stepped down recently while the new CEO, Makoto Uchida, will take charge only in the next couple of months. The Nissan pavilion looked completely lacklustre even while there were some senior management personnel at the press conference.

There is no question that Nissan is on shaky ground even while attempts are being made to steady the ship. Its decades-old relationship with Renault is under some pressure even while the latter’s Chairman, Jean-Dominique Senard, has been quoted recently saying that his top priority is to put things back on track for the partners.

While Ghosn cannot be absolved of his alleged misdeeds if found guilty, the face remains that he was the glue which held Renault and Nissan together for over two decades. More recently, a third ally in the form of Mitsubishi joined the fold in 2016 where Ghosn once again spearheaded the move.

Challenges ahead

Can Nissan actually bounce back in the coming months? There will be a hell of a lot of cleaning up to do beyond the job losses which will mean some ruthless decisions on cost-cutting measures elsewhere. This could include shelving projects like Datsun, as reported by a section of the media, which will not be entirely unexpected.

The entire process, however, will involve a lot of pain and this is where Renault will need to stick with its partner and help it navigate through the crisis. If present trends are any indication, it will be tougher than expected especially if one were to factor in the chaos that followed since Ghosn’s arrest. Renault and Nisan have been at loggerheads while a third party in the form of Fiat Chrysler Automobiles (FCA) stepped into the picture with a merger proposal.

The rub here was that it excluded Nissan which only increased its mistrust with Renault. The matter has been sorted out thanks largely to FCA which withdrew the offer in barely 10 days though there is no telling if an encore will happen. For now, the French government is keen that Renault and Nissan work on strengthening their alliance as top priority.

Ghosn’s trail will also be happening around this time and how that progresses will also be watched with great interest within industry circles. He has constantly denied the allegations of financial impropriety even while one skeleton after another keeps tumbling out of the closet. The court will finally decide his fate but this drama will also ensure that Nissan remains in the news even while its new top management will try and put the house in order.

From Renault’s side, there are a host of issues that needed to be addressed too. It now has an interim CEO after the abrupt exit of Thierry Bollore. Senard will now need to balance things out within the leadership team carefully since there will be some anxiety of more heads likely to roll.

After all, it is now pretty much clear that a whole lot of people, tipped to be close to Ghosn, are skating on thin ice which is not entirely unsurprising since this is typical of any organisation that sees a high profile ouster. And the manner of Ghosn’s arrest, where he was dramatically whisked away to a detention centre in Tokyo in November, could have only increased the chasm between his so-called followers and the rest.

By the end of the day, both Renault and Nissan have had their share of shocks at the top which means that the process of healing wounds and rebuilding the alliance will call for extremely astute leadership. This is where Senard will need to take one step at a time while coordinating closely with Nissan’s new CEO, Uchida. Beyond these two individuals, the French government will also need to do its bit in bridging the divide that has grown wider in recent times.

One of the theories that was doing the rounds on Ghosn’s arrest was that he paid the price for pushing the case for a Renault-Nissan merger. The Japanese were not clearly interested in the idea and, in fact, resented any such possibility. It is unlikely if this will resurface now despite the fact that Nissan is considerably more weakened and fragile now. Renault is perhaps stronger in contrast but will need to strengthen the fabric of its own leadership team.

Ghosn has also prepared a seven minute video which led to his rearrest (and subsequent release) earlier this year. Here, he spoke of his “love for Nissan and Japan” a story that began in the late-1990s when he was entrusted with the responsibility of putting the (then) beleaguered company in order.

In the video, Ghosn said he was fascinated by the challenge and remained committed to the success of Nissan. He also maintained that the 108-day stint in jail had not diminished his love for Japan or Nissan.

Yet, the former Chairman insisted that the entire coup leading to his arrest was a conspiracy and plot that virtually amounting to backstabbing.

According to him, the core of the problem was Nissan’s performance in recent times. He said there was hardly any cause for cheer on this front with the Japanese automaker posting poor results lately.

It is not surprising seeing this come from Ghosn considering that he knew better than anyone else what was going within Nissan (and Renault). While his style of management could have come for criticism on grounds of excessive control and micromanagement, the sequence of events following his arrest have hardly reflected any sense of direction.

Rehab exercise on cards

It is precisely this reality that both Renault and Nissan need to keep in check while planning their rehabilitation exercise in the coming months. The remedy could be brutal from the viewpoint of cutting costs and reducing workforce but care should be taken to ensure that this is not a short-term cure but something that will work in the long haul.

Given that the automotive industry is in the midst of its most disruptive phase in recent times with a host of challenges ahead, both in terms of technology investments as well as coping with geopolitical anxieties, all this could not have come at a worse time for Renault and Nissan. If they weather the storm and come out stronger and more united, it will be something to crow about.

On the other hand, if things get even messier, then there is no telling what is in store for Nissan.

Likewise, Renault will have to play its cards well in the event of another merger proposal coming in from FCA. Even if it agrees to give it a serious look, the best thing to do is include its Japanese ally in the business model.

By doing so, Renault will help rebuild the trust levels with Nissan while endeavouring to create yet another strong alliance with FCA.

For now, this seems farfetched but the automobile world is a strange place which throws up surprises. The tougher battle is to keep the relationship going: Renault and Nissan managed it successfully for over two decades, it seems futile to throw it all up now.

Published on October 24, 2019

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