September 5, 2019 / 4:35 AM / 15 days ago

Breakingviews - Nissan CEO has overstayed a lukewarm welcome

FILE PHOTO: Nissan CEO Hiroto Saikawa attends a news conference to release first quarter earnings at the company headquarters in Yokohama, Japan July 25, 2019. REUTERS/Issei Kato/File Photo

HONG KONG (Reuters Breakingviews) - Hiroto Saikawa has overstayed his welcome at the wheel of Nissan Motor. He and other executives may have padded their pay, Reuters reports. The figures at stake appear small compared to allegations levied against ousted boss Carlos Ghosn, but it hardly matters. Saikawa has neither rebuilt credibility nor fixed performance at the $25 bln carmaker. Investors have no cause to remain patient.

    Saikawa never won any popularity contests at Nissan. Still, some hoped he might serve as a decent caretaker after Ghosn was arrested, accused of financial misconduct by Japanese prosecutors. The Franco-Brazilian former chairman denies the charges, but the affair destabilised an already rickety relationship with alliance partner Renault.

   Now, Nissan’s audit committee has discovered Saikawa and other executives received excess stock-related compensation. Japanese media reported that Saikawa admitted as much, blamed it on “the Ghosn Era” and promised to pay it back. The results of the investigation are due to be presented to the board of directors on Sept. 9.

    The bad behaviour is a body blow to Saikawa’s authority, as he oversees an overhaul of Nissan’s corporate governance. Investors might have been inclined to overlook it, had business been otherwise good. Unfortunately, he has repeatedly underestimated how bad things are. While he told investors in May that performance had hit “rock bottom”, in July he proved it wasn’t. Net income fell to just 6.4 billion yen ($59 million) in the three months ending in June, down around 95% from the same period the previous year, while operating margin fell from 4% to 0.1%.

   Many of his strategic changes, meanwhile, have been questionable: headcount reductions, for example, were nearly all in overseas markets that are growing faster than Japan is.

   Nissan was supposed to return to the bond market today to raise nearly 250 billion yen ($2.4 billion), a long-awaited sign of normalisation. That has now been postponed, according to DealWatch.

    In the immediate aftermath of the scandal, there was a case for letting Saikawa deal with the worst of the fallout, push through painful strategic changes in the U.S. market, announce big layoffs and clear the way for a successor. For better or worse, that phase is complete. He has promised to resign once transition work was done: shareholders will hold him to that sooner rather than later.

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