NSANY Nissan Motor Company Ltd (PK)

By Sean McLain 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 10, 2018).

TOKYO -- Nissan Motor Co.'s Carlos Ghosn was planning to replace the company's chief executive before the plan was derailed by Mr. Ghosn's arrest in Tokyo last month, according to people with knowledge of the matter.

Word of Mr. Ghosn's plan adds a new twist to the drama inside Nissan. CEO Hiroto Saikawa has said the company was investigating possible misuse of corporate assets and other alleged wrongdoing by Mr. Ghosn for months this year and was supplying information to Tokyo prosecutors.

While that internal investigation was going on, Mr. Ghosn was growing increasingly dissatisfied with Mr. Saikawa's handling of business problems at Nissan including a slowdown in U.S. sales and repeated quality issues in Japan, say people familiar with the matter.

Meanwhile, Japanese prosecutors on Monday indicted Mr. Ghosn on charges of underreporting his compensation on five years of Nissan's financial reports, Kyodo News reported. The office of his lawyer, Motonari Otsuru, declined to comment. People familiar with the matter have said the compensation that prosecutors describe as unreported was deferred until after Mr. Ghosn's retirement.

In addition, Nissan as a company was indicted over the same charges, Kyodo said. A Nissan representative declined to comment.

Also indicted Monday was former Nissan representative director Greg Kelly, who served as Mr. Ghosn's right-hand man at the company, Kyodo reported. A lawyer for Mr. Kelly said his client believed the future payments weren't fixed amounts and so didn't have to be reported in financial filings. Using company channels, Mr. Kelly solicited the views of outside experts and was told the unreported deferred compensation was fine, Mr. Kelly's lawyer, Yoichi Kitamura, said.

Mr. Ghosn had expressed a desire for months to shake up the senior-management ranks at Nissan and made known to some executives his plan to replace Mr. Saikawa, said people familiar with the plan.

One of the people said Mr. Ghosn told associates he wanted to put Mr. Saikawa's ouster to a vote at a Nissan board meeting set for late November.

Instead, the board voted unanimously on Nov. 22 to oust Mr. Ghosn as chairman after hearing the results of Nissan's investigation into his alleged financial misdeeds.

Mr. Saikawa couldn't be reached for comment. It isn't known whether he was aware of Mr. Ghosn's plans for a management shake-up or whether the internal Nissan drama was connected to the timing of the arrest.

At the time of his arrest, Mr. Ghosn, as chairman of Nissan, was considered the ultimate decision maker at the company. Mr. Saikawa has said that Mr. Ghosn had too much power within Nissan and its alliance with French car maker Renault SA. Mr. Ghosn is chief executive and chairman of Renault, which owns a 43% stake in Nissan and has three board seats at the Japanese car maker.

Frictions between Renault and Nissan have risen in recent years. Some executives at Nissan, the larger and more profitable of the two, have expressed concern about Renault's influence on Nissan's business decisions.

Within Nissan, tensions before Mr. Ghosn's arrest involved not only the future of the alliance but also Nissan's own business struggles. Sales in the U.S. have declined year-over-year in six of the past eight months. Mr. Saikawa said Nissan needed to bolster U.S. profit margins, but initial efforts to get profits up by trimming spending on incentives caused sales to crater in April.

In Japan, the company has recalled more than a million cars since discovering issues with inspections at Nissan's factories more than a year ago, and the problems keep coming. On Friday, Nissan said it found workers in Japan incorrectly tested parking brakes and steering on some vehicles.

When he stepped down as Nissan's chief executive in 2017, Mr. Ghosn handpicked Mr. Saikawa as his successor, and he continued to support the Japanese executive in public. Behind closed doors, the two clashed over Nissan's problems, people familiar with their disputes said.

Still, not everyone believed Mr. Saikawa's job was in danger. One person familiar with the relationship between the men said their differences hadn't reached a point where Mr. Ghosn would have contemplated removing Mr. Saikawa.

In Mr. Ghosn's final years as Nissan chief executive, he pushed to reach an 8% share of global auto sales and an 8% operating margin. The company missed both those targets.

Mr. Ghosn believed that only the largest car makers would survive in a future of self-driving and electric cars, and he said the alliance of Nissan, Renault and Mitsubishi Motors Corp. should seek to sell 14 million cars by 2022, up from 10.6 million last year.

"With the explosion of technology that is coming, it is going to make it very difficult for smaller players to follow," Mr. Ghosn told The Wall Street Journal in September 2017.

Two months later, Mr. Saikawa offered a different perspective at a news conference, saying Nissan's efforts to expand volume were eating into profitability.

"Of course, everyone wants to see how big the company will be eventually, but the most important thing for a company is cash flow," Mr. Saikawa said.

Mr. Ghosn was an executive at Renault when the French auto maker took a big stake in Nissan in 1999. Dispatched to Japan that year to fix Nissan, Mr. Ghosn executed a rapid turnaround. For years, Mr. Saikawa worked closely by his side helping Nissan reduce costs in its supply chain.

When Mr. Saikawa's appointment as chief executive was announced last year, Mr. Ghosn said Mr. Saikawa was a man he could "totally trust."

As the relationship soured, some people within Nissan believed that José Muñoz, the chief performance officer, might be in line for Mr. Saikawa's job, according to people familiar with internal discussions at Nissan. Until the end of last year, Mr. Muñoz was head of Nissan's North American operations and he led the push to expand the company's U.S. market share. In March, Mr. Muñoz was put in charge of China operations and remained Nissan's performance chief.

However, Mr. Saikawa blamed Mr. Muñoz for Nissan's diminished U.S. profitability as well as the current sales decline, said one person familiar with their conversations. Mr. Muñoz couldn't be reached for comment.

Write to Sean McLain at sean.mclain@wsj.com

(END) Dow Jones Newswires

December 10, 2018 02:47 ET (07:47 GMT)

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