Carlos Ghosn hands keys to new Nissan CEO to focus on ties

Hiroto Saikawa becomes sole CEO as US sales incentives zap profits

Carlos Ghosn, one of the auto industry’s most celebrated turnaround artists, is relinquishing his CEO role at Nissan Motor and turning over day-to-day control to Hiroto Saikawa as he focuses on strengthening the carmaker’s alliance with Renault SA and Mitsubishi Motors Corp.

The move caught some observers by surprise. Only last October, Nissan elevated Saikawa to the co-CEO position along side Ghosn. However, the strategic challenges facing Nissan and its French alliance partner Renault have prompted the 62-year-old executive to step back.

Ghosn continues on as chairman of Nissan and the CEO and chairman of Renault. He’s also chairman of Mitsubishi Motors, a strategic partner 34 per cent owned by Nissan that’s trying to regain consumers’ trust from a months-long fuel economy scandal.

“There’s a moment when you have to pass the baton to someone else,” said Ghosn in an interview with Bloomberg News. “I’ve always said I would love to have a Japanese to be my successor and Saikawa-san is somebody I have been grooming for many years.”

Ghosn is a big advocate of detailed planning, speedy execution, and a laser focus on what needs fixing. So it’s not surprising that he has entrusted Nissan to Saikawa, who’s credited with overhauling Nissan’s purchasing system.

That matters because procurement can make up roughly 70 per cent of the cost of sales, according to Christopher Richter, a senior research analyst with CLSA Japan. “That was one of his big successes,” said Richter. “Saikawa is a very hard-charging manager. He’s similar to Ghosn in that sense.”

Part of the reason to make the change now is so that the new leader can shape Nissan’s next multiyear business plan —due to be announced later this year — and be responsible for it, according to Ghosn.

“Right now I’m accountable for the performance of Nissan, but from April 1, it will be Saikawa-san,” Ghosn said. “The change is the question of accountability.”

Ghosn built his reputation on one of the best turnaround efforts at Nissan, which he brought back from the brink of bankruptcy and is now bigger and generates more profits than Renault. In his time as CEO, Ghosn has steered Nissan to more than double the number of cars sold to about 5.6 million last year and increase the operating profit margin to 6.5 per cent from about 1 per cent.

Nissan and Renault have also made great strides in sharing parts and cutting costs from economies of scale. “The alliance has gotten to about the same level as Toyota and General Motors,” said Tsunenori Ohmaki, an analyst with Tachibana Securities Co. “They’ll try to refine it further.”

Ghosn has earned the sobriquet “Le Cost Killer” over the years for his rescue missions at Renault in the mid-1990s and later at Nissan, which ran off the rails before Renault bought a stake in 1999 and created one of the industry’s biggest automotive alliances.

He’s also been crucial to holding the Renault-Nissan partnership together, according to Maryann Keller, independent auto analyst in Stamford, Connecticut. “For the alliance to continue post-Carlos Ghosn, there’s got to be strong Japanese leadership inside Nissan that believes there’s an advantage in making it happen,” she said.

Like all companies in a rapidly changing industry, Nissan must adjust to new challenges such as self-driving technologies, the growing demand for electric cars and swelling trade protectionism in Europe and the US.

“It’s appropriate for Ghosn to step away from running the business day-to-day, and to devote all his time to thinking about the cosmic issues confronting the business,” Keller said. “It’s a different game today,” she said. “You can’t play it the same you played it in 1995.”