Carlos Ghosn’s explanation leaves more questions than answers
Former Nissan chief has not taken responsibility for Japanese company’s poor performance
What was going on at Nissan Motor for the past two decades?
With all his complaints about Nissan subordinates and the “depth of deprivation” he endured at the hands of the Japanese justice system, Carlos Ghosn didn’t really answer that at last week’s news conference, where he portrayed himself as a victim of human rights abuses.
Ghosn didn’t want to talk about his dramatic flight from Japan, of course, and again denied the charges levelled against him, including misuse of company assets and underreporting his income.
Here is what Ghosn really needed to address, and still does: why was Nissan’s performance so poor for the better part of the past decade, and why, if he was such a revered leader, didn’t he make the company a role model for corporate governance in Japan?
Ghosn showed himself to be good at deflection and blaming others. He accused his former protégé, Hiroto Saikawa, of running Nissan into the ground as CEO, a role shared with Ghosn from November 2016 to April 2017, after which Saikawa took the reins and his mentor continued as chair.
The Brazilian-born executive, who had experience juggling top roles at Renault and Nissan for years, said he was moving on to help Mitsubishi Motors recover from a mileage scandal after Nissan completed its acquisition of a $2.3bn stake.
But Nissan had been struggling well before then. Saikawa was taking over a company that was showing early signs of imminent trouble. Margins shrank to 11% by the end of 2017 from 16% in June 2010, coming down faster than some peers as the global market started peaking. Sales incentives, coupled with dated models such as the Rogue and Sentra, were eating into profits in the vital US market and eroded the brand.
Ghosn should have noticed the strategy was running astray. If anything, he was a man of targets, especially global market share and operating margins. Those often fell short. Saikawa said last week that he felt “betrayed” by the way Ghosn portrayed him.
This leads to corporate governance. If Ghosn was truly the corporate tsar portrayed in books on management, something he touted from his Beirut podium, then why such poor results in reforming oversight at Nissan? The vehicle maker resisted adding outside directors for two years after Japan introduced its governance code in 2015, one of 11 companies to hold back. As of 2017, it still hadn’t joined most international companies in creating committees on accountability and transparency. You’d think a pioneer would have been out front before the issue went mainstream.
And, crucially for a company ruled so long by one man, how much time was spent on succession planning when Ghosn moved on to fix Mitsubishi? Was it responsible for him to keep one foot squarely in Nissan while managing two other carmakers?
Nissan has lost billions in value since Ghosn was arrested in November 2018, which he blames on management’s preoccupation with him and apathy for shareholders. But Nissan had already underperformed Japan’s Topix 500 for years, while return on equity dropped between 2011 and 2016 — when Ghosn alone was in charge. It actually rose a bit after Saikawa assumed the joint CEO role.
The legendary executive may have brought Nissan back from the financial brink as the millennium turned, but that didn’t seem to be his priority over the past 10 years. Cementing his legacy focused his mind on the alliance with Renault and pulling off a new big, spectacular deal. Does anyone really believe that a merger of Renault and Nissan with Fiat Chrysler Automobiles was in fact viable, as Ghosn insists? It’s clearly a flawed strategy in a global market suffering weak demand and a poor success rate for large-scale mergers. Already struggling with culture clashes with Renault, would that have left Nissan in better hands?
And a final question: where did Ghosn’s world end and Nissan’s begin? As with the likes of General Electric’s Jack Welch, long-ruling, dominating CEOs often end up operating in grey areas. Ghosn made it abundantly apparent at his press conference, whether he meant to or not, that there wasn’t a clear line. Versailles, c’est lui.
Studies have shown long tenures hurt companies because the longer CEOs reign the more reliant they become on internal networks and information, losing sight of market conditions.
Nissan executives were surprised Ghosn wasn’t able to explain his alleged misdeeds. For Saikawa, Ghosn “could have just said it in Japan”. Before Nissan can make perhaps an existential case with investors, it needs to shed the baggage of Carlos Ghosn. It’s far heavier than the musical instrument case he supposedly escaped in. BloombergView 2020
• Trivedi, a former Wall Street Journal reporter, covers industrial companies in Asia for Bloomberg.