NSANY Nissan Motor Company Ltd (PK)

By William Boston 

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 19, 2018).

Carlos Ghosn's drive to increase Nissan Motor Co.'s share of the U.S. market added to tension with the auto maker's management, who felt his push came at the expense of investing in Japan.

Strains to the alliance of Renault SA, Nissan and Mitsubishi Motors Corp., were apparent well before its creator's arrest last month. But the extent to which Mr. Ghosn's U.S. plans contributed to the alienation of Nissan executives has become clearer since his detention.

Hiroto Saikawa, who began shifting Nissan's strategy after succeeding Mr. Ghosn as the Japanese company's CEO in 2017, has opened up about the rift.

"The investment in the Japanese market was very weak because there was too much power concentrated in one individual who decided that the Japanese market was less important, and we spent too much money on the U.S.," Mr. Saikawa said, according to the transcript of a general meeting at Nissan's headquarters in Yokohama, Japan, on Nov. 26, days after Mr. Ghosn's arrest.

"He felt that there was no point investing in Japan where the population was stagnating," Mr. Saikawa told employees, committing himself to correcting what he described as Mr. Ghosn's mistakes.

Mr. Ghosn, who continued as Nissan's chairman until his ouster last month, was charged by Japanese authorities with understating his compensation and remains in detention in Japan. A person familiar Mr. Ghosn's defense said the executive maintains his innocence.

Mr. Ghosn led Renault's investment in Nissan in 1999 and the effort to revive Japan's second-largest auto maker by sales. Underlying his strategy was a plan adopted in 2011 called Power 88, which aimed to boost Nissan's global market share to 8% by 2017 and its profit margins to 8%, according to a company presentation at the time.

To lift Nissan's global business, Mr. Ghosn pushed especially hard in the U.S., setting a market-share target of 10% by 2017, according to public statements by him and Nissan U.S. executives. To boost sales there, Nissan put pressure on dealers with a campaign under the slogan "Grow or Go," led by José Muñoz, whom Mr. Ghosn appointed to run the U.S. business.

With the appointment, Nissan became more aggressive than its competitors, according to dealers. Mr. Muñoz prodded them to sell their franchise if they weren't up to hitting the campaign targets, according to dealers and comments by Mr. Muñoz in videos available on YouTube.

"If a dealer didn't perform, they'd threaten a dealer with termination notice," said Alan Haig, president of Haig Partners, a Fort Lauderdale, Fla.-based brokerage that arranges sales and purchases of car dealerships.

A spokesman for Nissan said, "Nissan values the close relationship with our dealers to grow our business." The auto maker didn't make Mr. Muñoz available for an interview and he didn't respond to requests for comment.

Nissan did boost its U.S. sales volume. Last year, Nissan moved 1.6 million vehicles, good for 9.2% of the market and up 75% from the company's U.S. tally for 2010. Growth was fueled by incentives as well as sales to rental car operators. Fleet operators buy cars in large volumes, but they tend to be less profitable than retail sales, according to industry analysts.

In its fiscal year ended March 30, Nissan reported a record net profit, thanks in large part to the U.S. corporate tax cut. But operating profit, which is closely watched by analysts as it excludes one-time financial gains or other windfalls, fell 23% to Yen575 billion ($5.11 billion). The result was a profit margin of 4.8%, well below Mr. Ghosn's target.

Mr. Saikawa, who was chief competitive officer at Nissan before becoming CEO, disagreed with Mr. Ghosn's strategy to boost sales and believed the sharp focus on U.S. growth came at the expense of investment in Japan, according to a document reviewed by The Wall Street Journal. In addition, accusations circulating within Nissan about Mr. Ghosn's hidden pay and lavish spending at the company's expense were mixing with deep discontent over his long reign over the auto maker.

The relationship between the two men grew tense, and Mr. Ghosn was preparing to oust Mr. Saikawa before his arrest, as previously reported in The Wall Street Journal.

Sean McLain contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

December 19, 2018 02:47 ET (07:47 GMT)

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