With Saikawa’s exit, Renault and Nissan need to bury the hatchet

Over the last 11 months, Nissan Motor has been in the news for all the wrong reasons.

The latest involves the exit of its CEO, Hiroto Saikawa, who admitted that he had been improperly overpaid beyond his actual earnings. The Board was quick to identify an interim chief even while the plans are to find a full-fledged CEO by the end of next month.

The Saikawa saga is the latest in a series of setbacks for Nissan since the time its former Chairman, Carlos Ghosn, was arrested in a dramatic turn of events last November. He was in a Tokyo detention centre for over 100 days, released on bail only to be re-arrested later and is now out, though with severe travel constraints.

Saikawa took over as CEO even as the auto industry was in a state of shock over Ghosn’s arrest. Nissan, meanwhile, made known that a full-fledged investigation would be made into the massive web of corruption that Ghosn was allegedly involved in even while he insisted that he was the victim of a well planned conspiracy.

Financial irregularities

What is astonishing now is that there is an encore of financial irregularities found this time around in the case of Saikawa too though it is too early to say what kind of a probe will follow as a result. It may not be as extensive as what Ghosn is being subject to but is still the kind of publicity that Nissan could have well done without in these troubled times.

It is no secret, however, that Saikawa has been in charge of a wobbly ship that seems to be going nowhere since the time Ghosn was arrested. Nissan and its ally of two decades, Renault, have been at loggerheads even while attempts are being made to smoothen the relationship and put the house in order.

The Japanese company has also not been in great financial health, which has prompted it to declare a substantial reduction in headcount over the next three years. India is also among the countries identified for job losses at a little over 1,700, which translates to nearly 14 per cent of the total numbers planned for removal. All this is definitely not a happy state of affairs for a company in free-fall mode.

Possible turnaround?

At one level, it could be argued that Saikawa’s exit is really not going to cause tremors with Nissan and, on the contrary, pave the way for a top-class CEO who could turn things around. This is precisely what someone like Carlos Tavares did when he took charge of an extremely fragile Peugeot-Citroen (now Groupe PSA) and spearheaded a dramatic recovery story over the last few years.

There is no reason why something like this cannot be thought of for Nissan and the international media has been reporting names of some potential candidates. Whether they can emulate a Tavares of PSA at Nissan is the million dollar question especially when there are so many cracks that have surfaced within the system.

Interestingly, prior to his re-arrest in April this year, Ghosn featured in a seven minute video where he had referred to the accusations against him as biased, taken out of context and twisted in a way to “paint a personnage (character) of greed and dictatorship”.

He also spoke of his love for Nissan and Japan, a story that began two decades earlier when he set about putting the beleaguered company in order. In the video, Ghosn said he was fascinated by the challenge and remained committed to the success of the auto-maker despite the ordeal in prison, which had not diminished his love for Japan (or Nissan).

The interesting part of the video, beyond his accusations of a conspiracy and backstabbing, was on Nissan’s performance in recent times. The former Chairman reiterated that there was little to be happy about on this front. He spoke of selfish fears/interests creating value destruction and playing dirty games.

Ghosn also made no bones about the fact that Nissan’s performance had been mediocre and there was cause of concern since there was really no vision for the alliance. To cynics, this would have been a classic case of playing to the gallery, where people in glass houses should not be throwing stones, but Ghosn pretty much nailed it.

Sure, he stands accused of serious financial crimes even as he insists that he is innocent. Right now, the bigger concern is Nissan’s health and its fractured rapport with Renault. Putting things back in place is not going to be the easiest of tasks for Saikawa’s successor.

‘Doing a Ghosn’

In a way, he would have to pull it off on the lines of what Ghosn did two decades earlier when Renault took over a beleaguered Nissan and there was a lot of painful restructuring that followed. The Japanese automaker eventually grew from strength to strength with the result that its French partner could not quite keep pace.

Ghosn was rightly credited with this turnaround, which in recent times saw Mitsubishi added to the alliance. He could have been accused of excessive control and micromanagement but the truth also remains that the house has virtually collapsed after his arrest.

Things are also not the same in the global automobile arena with a host of new challenges emerging in the form of tighter emission laws worldwide, electrification, autonomous driving and so on. It will require a much stronger Nissan to cope with these changes and move ahead, which only reaffirms the need for a strong leader.

Renault will also have to play out its role as the senior ally and display a lot of responsibility at this point in time. One of the reasons that has been cited for Ghosn’s arrest is that he was keen on a Renault-Nissan merger, an idea the Japanese company was bitterly opposed to.

From its point of view, it was not getting a fair deal all these years with a lower stake of 15 per cent in Renault and no voting rights. The fact that it was also the stronger of the two (which is not the case any longer) would have only intensified the angst with the Nissan ecosystem.

A merger would have been the last straw and this is an option that is unlikely to be exercised right now. There was added tension some months ago when Fiat Chrysler Automobiles (FCA) made a merger offer to Renault where Nissan was not part of the scheme of things.

Naturally, this caused greater friction between the partners even while the French government, which has a 15 per cent stake in Renault, made clear that Nissan’s interests would need to be protected first. FCA withdrew the offer though speculation has been rife that talks could resume again.

Nissan a priority

The Renault management has reiterated in recent times that no such proposal is on the cards, which means the the bigger priority is to mend fences with Nissan first. This is a partnership that does not deserve to be broken for flimsy reasons; after all it has succeeded where other high profile marriages like Daimler-Chrysler failed.

There is also no denying the fact that tremendous synergies and cost-savings have been achieved in this alliance, which catapulted it to among the world’s top two players not-so-long ago. Even if talks with FCA were to resume, it makes sense to have these along with Renault-Nissan-Mitsubishi and make the most of the benefits that will accrue in the process.

After all, the following decade will call for huge investments in new technologies and companies are better off in partnerships rather than face the music alone. This explains why Ford and Volkswagen have tied-up as also Toyota and Suzuki among the high profile names in the industry. There are others that will also seek an ally to cope with the challenges ahead.

Given this backdrop, it is almost suicidal for Renault and Nissan to deepen the fissures and emerge weaker when the saner option is to shake hands and work towards a stronger alliance. And if FCA were to be part of this journey, it will be the ideal script for the next decade.

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