Business / Corporate

Nissan CEO tells angry shareholders he is ready to be sacked if no turnaround

Reuters

Nissan Motor Co.’s new chief executive said Tuesday he will accept being fired if he fails to turn around Japan’s second-biggest automaker, which is grappling with plunging sales in the aftermath of the scandal surrounding former Chairman Carlos Ghosn.

Addressing shareholders for the first time since taking over the top position in December, Makoto Uchida put his job on the line at a raucous meeting where he faced demands ranging from cuts to executive pay to offering a bounty to bring Ghosn back to Japan after he fled to Lebanon.

Nissan’s worsening performance has heaped pressure on the 53-year-old Uchida, who had been the firm’s China chief and is now its third CEO since September, to come up with aggressive steps to revive the company.

“We will make sure that we steer the company in an effective way, so that (it) is visible to the eyes of onlookers,” said Uchida, who faced repeated heckling by shareholders. “I will commit to this: If the circumstances remain uncertain you can fire me immediately.”

The new leader must prove to the board that he can accelerate cost-cutting and rebuild profits, and that he has the right strategy to repair the firm’s partnership with France’s Renault, sources have said.

Uchida did not give a time frame for improving Nissan’s performance but pleaded for patience while he compiles a plan by May to recover from crumbling profits and a corporate shake-up in the wake of Ghosn’s arrest in late 2018 over financial misconduct charges.

“If you can be patient a little bit longer, on a day-to-day basis you will be able to sense we are changing,” he said.

Shareholders gathered at the extraordinary meeting in Yokohama to vote in new directors including Uchida and Chief Operating Officer Ashwani Gupta.

Their appointments highlight a changing of the guard at the automaker, as shareholders were also voting on motions for former company stalwarts CEO Hiroto Saikawa and COO Yashuhiro Yamauchi to leave their board director positions.

According to three sources familiar with the thinking of some on the company’s board, Uchida is effectively on probation and has a matter of months to show he can revive the ailing automaker.

The pressure intensified last week when Nissan, which has had a year of turmoil since the arrest and sacking of long-time leader Ghosn, posted its first quarterly net loss in nearly a decade and slashed its forecasts for full-year profit to an 11-year low and cut its dividend outlook to its lowest since the 2011 financial year.

One of the people familiar with the intentions of some on Nissan’s 10-member board said an assessment of Uchida’s efforts and a decision on his future would likely be made toward the middle of the year.

“Probation is more or less the right way to describe the situation Uchida is faced with, if not more serious,” the source said this week. “In the worst case scenario he could be shown the door.”

Uchida referred queries to Nissan about whether he had just months to demonstrate he could turn the carmaker around, whether board members were satisfied with his work, and his relationship with other senior executives.

The company rejected suggestions of Uchida’s uncertain circumstances as having “no factual basis.”

“Effectively or otherwise, Uchida is absolutely not on probation,” a Yokohama-based spokesman added. “There does not exist such a concept or system within Nissan to put a CEO on probation. He is CEO.”

Some supporters also stressed that Uchida has only been in the top job for little more than two months, while Nissan’s business has been in decline since 2017. Executives and analysts have previously said the company’s current woes are not of Uchida’s making but are the fallout from an aggressive and poorly executed global expansion under Ghosn and Uchida’s predecessor, Saikawa.

“Nissan is on the right path for recovery … although it might be a gradual process,” Uchida said in a video message to employees in October, shortly after being named CEO.

Still, it has been a difficult start for the new CEO, who officially took the helm at the beginning of December and must act swiftly to counter a slide in sales that is accelerating in key markets like the United States and China.

When he took the stage at corporate headquarters in Yokohama early that month, Uchida billed himself and his senior leaders — Gupta and No. 3 Jun Seki — as a tight “one team” that could deliver a bright new dawn for the automaker.

Later in December, two board members sat down with Uchida — whose elevation has been opposed in some quarters — to tell him he needed to consult more with Seki and Gupta, stressing he had been given the top job on the condition that he worked closely with the pair, according to two of the sources.

The “one team” hasn’t shown much unity, though.

Seki resigned in late December and joined electric motor producer Nidec Corp. as president.

Chief Operating Officer Gupta, meanwhile, has griped privately to colleagues about having a dysfunctional working relationship with the new CEO, according to two of the sources, but he is committed to work with Uchida to turn Nissan around.

One source said the board would not brook internal squabbles or procrastination among Uchida, Gupta and the rest of the executive team: “The biggest problem is nothing getting done, at a time when we need to take decisive actions.”

Gupta referred queries to Nissan, which said Uchida and Gupta were “cooperating closely, sharing information, and are engaged with executing the performance recovery plan and other reform moves, including fixed cost-cutting.”

Nissan faces an array of structural woes, from high fixed costs to weak management to a strained partnership with Renault, which began unraveling after Ghosn’s arrest in late 2018.

The problems come at a pivotal time when Nissan and other automakers are attempting to come to grips with a major, and costly, technological shift towards electric and self-driving vehicles.

The carmaker posted a net loss of ¥26.1 billion ($238 million) for the October-December third quarter and it cut its annual operating profit forecast by 43 percent to ¥85 billion.

Though Nissan expects to report a small profit for the year ending in March, some executives are worried it could post a loss, according to the sources, especially given the fact that the forecast does not take into account the impact on sales in China and beyond from the coronavirus outbreak.

Uchida said at the earnings media conference Thursday that Nissan was looking at the possibility of accelerating existing restructuring plans, as well as implementing additional measures — but he added the company would not be able to provide details of those extra steps until May.

Uchida replaced Saikawa, who resigned in September after admitting to being improperly overpaid. His appointment was contentious, with some members of the board’s six-strong nomination committee pushing for Seki or Gupta, according to two of the sources.

Seki, in fact, garnered the most first-choice votes — three — but not a majority, leading to another round where second preferences were taken into account, Uchida received five second-choice votes and so won the job, the people said.

By mid-January, however, some board members were starting to regret the decision, the sources said. While Uchida had touted a fresh start in his speech in December, he has still not publicly spelled out specifics on strategy.

Some members of the board complained that he was even sitting on some of the turnaround measures hammered out by Nissan executives last year, before he took the reins of the company, the sources said.

A team led by Seki and charged with formulating a series of turnaround measures had proposed effectively pulling out of Indonesia, where the Nissan group’s market share fell below 2 percent in 2018, according to a separate source close to that team.

Under the plan, the company would ask partner Mitsubishi Motors Corp., an SUV powerhouse in Southeast Asia, to contract-manufacture Nissan cars and help market them in Indonesia, the person said.

When Uchida became CEO, however, he struck a cautious stance and made no decisions on that proposed pullout, though the idea has more recently began gaining momentum after much prodding by Uchida’s subordinates and the board, according to the source.

In November, Seki’s team also suggested Nissan go into a more intense “crisis mode,” significantly stepping up spending cuts, including sizable reductions in year-end bonuses for top executives, said the source, adding that the proposals had not been implemented under Uchida.

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