Even for Carlos Ghosn, the man dubbed “le cost killer” after overhauling Renaultand saving Nissan from near collapse, leading three companies could be a dangerously bold stretch.
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The 62-year-old chief executive of Nissan and Renault is putting his own reputation on the line by agreeing to become chairman of lossmaking Mitsubishi Motors.
Mitsubishi formally joined the Renault-Nissan alliance on Thursday via a $2.3bn capital injection, in a move that means the enlarged group should be right behind Toyota, Volkswagen and General Motors in terms of number of cars sold each year.
“With 10m cars, we have a handicap to nobody and we have an advantage on most,” said Mr Ghosn at a media briefing in Tokyo.
In order to devote enough time to reviving Mitsubishi, which was engulfed in scandal in April after admitting to cheating on its vehicles’ fuel economy data, Mr Ghosn will for the first time share the role of Nissan top manager with a colleague.
Becoming Mitsubishi chairman is “a confident move but a big gamble for Mr Ghosn”, says Tosh Kojima, managing director at DC Advisory, a corporate finance adviser. “If things go wrong, it will definitely tarnish his otherwise fabulous reputation and godlike status not just in the industry but in Japan as a whole.”
Analysts say Nissan’s purchase of a 34 per cent stake in Mitsubishi for $2.3bn is as much about ensuring the survival of the Franco-Japanese alliance in a new era of technology competition as it is about a bailout of a smaller rival.
“It looks like Mr Ghosn rescued Mitsubishi,” says Takaki Nakanishi, a former Merrill Lynch analyst who now runs his own research group. “But having Mitsubishi’s platform will make it easier for Renault and Nissan to draw its next phase of growth strategy.”
The partnership between Nissan and Mitsubishi, makers of the Leaf and i-MiEV electric vehicles respectively, will give them the scale to cut costs amid the rapid rise of Tesla, the new industry entrant that has made a name for itself by manufacturing sophisticated battery-powered cars.
The new alliance will generate ¥24bn ($231m) in cost savings and other benefits in 2017-18 and ¥60bn in the following fiscal year, said Mr Ghosn.
In spite of depressed car sales in Japan due to several safety scandals dating back to 2000, Mitsubishi has maintained a loyal customer base in Southeast Asia, which would help address Nissan’s weakness in the region.
Mitsubishi also has a global manufacturing hub in Thailand from where its pick-up trucks are now exported to the Middle East, Africa and Latin America.
“Obviously we are not happy with our performance in [the Association of Southeast Asian Nations],” said Mr Ghosn. ‘This is where the synergy is working the other way, where Mitsubishi can deliver a lot of good examples and benchmark for Nissan to perform better.”
Meanwhile, the promotion of Hiroto Saikawa, Nissan’s chief competitive officer, to the role of co-chief executive will give Mr Ghosn some space to focus on Mitsubishi’s turnround.
Mitsubishi will probably need to carry out painful restructuring in Japan, according to Mr Nakanishi, to rebound from expected net losses of ¥240bn in 2016-17.
In the case of Nissan, Mr Ghosn closed five Japanese factories, axed 21,000 jobs worldwide and halved the number of parts suppliers after joining the company as chief operating officer in 1999 following three years at Renault.
Mr Ghosn stressed his chairman role at Mitsubishi will focus on ensuring strong corporate governance, including support to Osamu Masuko, who has been asked to stay on as chief executive. “I have no intention to interfere with the management of Mitsubishi,” he said.
His new responsibilities at Mitsubishi also come at a time of fraught relations between Mr Ghosn and the French government, which commands about 20 per cent of voting rights at Renault. The state voted in April against Mr Ghosn’s pay package at Renault, which wields effective control over Nissan through a 43 per cent stake.
Still, a Renault investor based in Paris is optimistic about Mr Ghosn’s additional responsibilities. “Ghosn can probably handle another role,” says the shareholder. “That man is a machine.”
A deeper uncertainty for investors is whether the alliance led by Mr Ghosn can thrive in the new age of electrification and self-driving cars, particularly given technology groups including Google are working on vehicles.
“Like it or not, Carlos Ghosn’s competition is not Toyota but the likes of Tesla and Google,” says Mr Kojima. “Buying Mitsubishi Motors is not going to help them on this front.”
Source : FT
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