It was interesting to read in the Nikkei that Carlos Ghosn is planning a reorg at Nissan, he will step down as Nissan CEO, allowing for Saikawa-san to take the reins. Ghosn will focus on the inter-Alliance strategy and collaboration, under the aegis of Renault-Nissan BV in Amsterdam which will control group strategy and planning.
Amsterdam seems very likely to pick up more Japan-related business post-Brexit. At a recent client meeting, the CEO of a Japanese firm explained how rents are 1/3 of London, English language is prevalent, and a new rail-line is soon to connect the financial district with the Eurostar line. Moreover, expats moving to Amsterdam receive a 30% personal tax reduction for 5 years. BTMU announced a significant move of staff to Amsterdam, surely other banks and companies will follow.
My (quite clumsy) attempt at translating the article is below
[Ghosn will devote himself to the operation of the Nissan Alliance, aiming for further evolution in collaboration.]
The press release announcing the change in Nissan CEO included a passage explaining the true intention of the change in personnel; “To expand the Alliance and focus on operations, and concentrate upon maximising opportunities for partner companies.” Renault Nissan BV, registered in Amsterdam, the Netherlands, is to be the Alliance Head Office. Ghosn will continue to control the command centre function of the Alliance. The location of stage where activity takes place will change.
Ghosn is chairperson of the ‘Alliance Board’ of Renault-Nissan BV, covering co-operation and governance. Topics of discussion cover progress in medium term business planning, product planning, joint use of products and engines, and strategic investment: this is the place where group strategy is decided. Takaki Nakanishi of Nakanishi Auto Industry Research pointed out that “Whilst Ghosn will remain as Renault and Renault-Nissan BV CEO, and as Chairman of Nissan, there will be no short-term change in the running of Nissan.
The factor providing this push to focus on Group operations seems to be the sense of danger towards the auto industry, which is being attacked by seismic changes. One epicentre of such change is America. President Trump has declared that the North American Free Trade Agreement (NAFTA) will be re-examined. The Republican Party in the House of Representatives are examining a ‘Border Tax Adjustment’ proposal to implement greater customs duties.
According to Nakanishi Auto Industry Research, of Nissan’s US sales up to March 2017, only 55% were locally manufactured. If the policy of the President and Lower-House Republicans were to be realised, there would be a dual impact on commerce and the tax system. According to the same source, if the Border Tax Adjustment were to be 20%, this would reduce Nissan’s consolidated net profit by 54% during FYE18/3.
Increasing local production cannot happen overnight. Nissan have strengthened a purchasing strategy dependent upon Total Delivery Cost (TdC). This is not just procurement of parts, but covers increasing cost competitiveness co-ordination of production and flow of goods for both companies. A system of procuring from the most cost-effective regions has already been established. New investment in the US may lead to the risk of over-production in the future.
This is why effective use of Group assets are so important. For investment looking at the future electrification of cars, joint local production with Mitsubishi Motor Corp, who are emphasising Plug-in Hybrid (PHV) technology, seems optimal. There are also large benefits from a purchasing perspective. With MMC, 2016 group unit sales were 9,96m- approaching the scale of Toyota Motor Corp.
Ghosn commented that “Scale is resilience. Applied with wisdom and discipline, scale provides increased resilience for an operation.” Effectively combined with Group investment, the benefits of scale can be drawn out – for individual companies this is linked to improved valuation and decreased risk.
This is also a step considering France, the mother country of Renault. For France, facing its Presidential election in April, an issue rising to prominence is how to handle the governmental holding shares in Renault, given the need to reduce the financial deficit. Upon the advent of a new administration, there is a possiblity that 20% of Renault holding shares may be sold. Rival Peugeot is investigating the possible purchase of Opel, part of General Motors. It has started an expansion strategy. Mr Ghosn is under the glare of Government and public opinion, and must raise the presence of the Renault-Nissan Alliance.
On 23 Feb, Nissan’s shares dropped 1% on the previous day (JPY6.5), closing at JPY1112. According to Nakanishi, the market is measuring the meaning of Ghosn’s change of CEO, but the entrusted successor is co-CEO Saikawa Hiroto.
It can be said that this is not a youthful rejuvenation, rather someone who for many years has undergone hardship and collaborated in Nissan’s reform; certainly a colleague who can be trusted. Ghosn is also placing deep trust in Mashiko Osamu, CEO of Mitsubishi Motors. Having set about the reorganisation plan, he can take the ideal position. There is no doubt they are gearing up towards progress.