Mon, 23 Sep 2019

Less than a year since the dramatic downfall of Carlos Ghosn, Nissan is losing another leader.

Chief Executive Officer Hiroto Saikawa was asked by the board on Monday to step down by September 16. He'll be replaced by Chief Operating Officer Yasuhiro Yamauchi until a permanent replacement is named by the end of October.

With Saikawa felled by a scandal over excess pay, the Japanese automaker finds itself in familiar territory, facing questions over its corporate governance and an uncertain future. In the months since Ghosn - the auto titan who ruled over Nissan for two decades -- was arrested for allegedly under-reporting his own compensation and misappropriating funds, Nissan has struggled to bounce back.

Under Saikawa's reign, he distanced Nissan from his larger-than-life predecessor, while earnings deteriorated and relations with top shareholder Renault SA soured to the point that a mega-merger with Fiat Chrysler Automobiles NV collapsed. Nissan's next CEO will face the challenge of righting a ship in disarray at a sensitive time, with global automakers rushing to position themselves for the coming age of electric vehicles and robocars.

Pressure on Saikawa intensified following reports last week that he and other Nissan executives were paid more than they were entitled, dealing a final blow to the under-siege CEO. Amid the fallout from losing a leader who loomed large over the company for a generation, Nissan has also been grappling with decade-low profits and job cuts as car sales slow globally.

"I should have clarified, ironed out everything and handed my baton over to a successor, but I couldn't finish everything," Saikawa said to reporters late Monday, dressed in his usual white shirt and jacket without a tie.

The Nissan lifer, 65, betrayed few emotions as he sat alone, taking questions after the board had finished explaining his departure. "I wanted to set things right and resign."

Ten candidates

The board's nomination committee will select the next CEO from a pool of about 10 candidates, said lead director Masakazu Toyoda. The prospects include non-Japanese, women and people from Renault, Nissan's partner in a global auto-making alliance that also includes Mitsubishi Motors.

Renault and its largest investor, the French government, declined to comment on Saikawa's resignation.

An internal investigation by Nissan found Saikawa had been overpaid by 96.5 million yen ($901,000) via stock appreciation rights, or 47 million yen after tax. Under the plan, directors receive a bonus if the company's share price performs better than a set target. Other executives were also said to have received excess pay.

Although Saikawa's leadership has come under scrutiny since Ghosn's arrest for financial crimes, he was reappointed as CEO by Nissan's shareholders earlier this year. In June, Saikawa said that he should be held responsible for the instability unleashed by Ghosn's downfall and that he wanted the company to accelerate the search for his replacement.

The issue over excess pay first came to light after Greg Kelly, a former senior executive who was arrested along with Ghosn in November, accused Saikawa in a magazine interview of improperly receiving compensation. Nissan doesn't consider the excess payment to have violated any laws, and Saikawa has denied he ordered the payments, saying the matter was mishandled by staff.

It's an ironic turn of events for Saikawa, who went from being Ghosn's protege to the public face of the accusations against him. Nissan's CEO appeared before the world's media just hours after the former chairman's November 19 arrest to denounce his behaviour, describing his "indignation" and "despair" at the conduct of his former boss.

Like Saikawa now, some of the allegations against Ghosn related to pay. The former chairman is out of jail on bail and due to face trial in Tokyo next year on charges that he failed to disclose compensation from Nissan, passed on trading losses to the carmaker and redirected company money into his own accounts. Ghosn denies all the allegations.

Rocky tenure

Saikawa's tenure as the CEO of one of Japan's automaking icons was marked by a series of missteps.

Just months after he took charge in April, 2017, Saikawa was criticised for not having bowed enough when apologising for having used un-certified workers to sign off on inspections of newly built cars. Calls for him to resign by Japanese media were amplified after he didn't show up at a press conference to address the falsification of emissions data.

The deterioration of Nissan's business in the US - a source of tension between Ghosn and Saikawa before the chairman's downfall - has continued into this year. Saikawa has blamed Ghosn's quest to grow market share in the US at all costs, including by hiking incentives and boosting fleet sales.

The deterioration in relations between Nissan and Renault since Ghosn's arrest and an aborted merger with Fiat Chrysler also added to pressure. Long-held tensions between the two carmakers over control of their alliance broke into the open after Ghosn was arrested and worsened when Renault's new chairman, Jean-Dominique Senard, pursued the Fiat deal without telling Nissan.

French pressure

Saikawa started at Nissan after graduating from the University of Tokyo in 1977. Much of his career was spent in the purchasing department, a critical function in any company but especially so for an automaker, since procurement can account for as much as two-thirds of the cost of sales.

He served on the board of Renault, Nissan's biggest shareholder, between 2006 and 2016. During that period the alliance came under pressure from the French state, which had increased its stake in Renault without informing Ghosn.

Saikawa led Nissan's negotiations with Renault and the French government in 2015 to address an imbalance that left the Japanese carmaker with no voting rights for its stake in the French carmaker. A crisis was averted after the French government pledged not to interfere in Nissan's governance.

Since Ghosn's arrest and ouster as chairman, Saikawa has led a company-wide overhaul of Nissan's corporate governance, including by bringing in more outside directors. He continued to lead negotiations on re-balancing the capital ties with Renault before his resignation.

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