Nissan was once regarded as one of the automotive world's great comeback
stories, a scrappy Japanese manufacturer that had first earned worldwide
respect through a combination of quality manufacturing, innovative design,
and some racing credibility was later saved from the brink of collapse by
a globetrotting outsider executive who sparked a renaissance.
But now that man is an international fugitive and Nissan is struggling
once again. The company has suffered a series of misfortunes, many of its
own making and some due to the disastrous effects of the coronavirus
pandemic. Now, former leader Carlos Ghosn is hiding out in Lebanon after a
bewildering escape from Japan worthy of a spy novel.
Nissan has always been a company that seems to go through these near-death
experiences every so often.
You know things are really rosy for a while and then there's a near-death
experience. And now Nissan is faced with having to resolve its disputes
with Ghosn while carving a new path out of the trouble it is in.
The history of Nissan is complicated, but its roots can be traced as far
back as 1911 when a Japanese engineer named Masujiro Hashimoto founded
the Kwaishinsha Company company in Tokyo.
In 1914, the company made the DAT-GO, a prize winning car engineered for
Japanese streets.
The company merged with a couple of other related Japanese manufacturers
and was renamed the Nissan Motor Company in 1933.
In 1937, Nissan became the first Japanese automaker to mass produce
vehicles, starting with the Datsun Type 15.
The first Nissan model introduced to the United States was the Datsun 1000
sedan in 1958.
The following year, the company began importing the first mass-produced
compact pickup to the U.S., the Datsun compact truck.
About 220 American soldiers bought the pickup in Japan and brought it home
with them. This was the first of several innovations Nissan would
introduce into the American pickup market.
More Nissan and Datsun models followed in the 1960s.
In 1961, the Datsun Fairlady 1200 Roadster began a long line of
performance sports cars, often with just two seats.
Nissan continued to import pickup trucks into the United States and began
making an SUV called the Nissan Patrol, which took a few cues from the
British SUV legend Land Rover.
By the 1970s, Nissan was becoming tremendously successful.
Its total U.S.
sales volume surpassed one million vehicles in 1973, and Nissan became the
top importer to the United States in 1975.
In the 1960s and 70s, Nissan also became a force in racing, starting with
the 2000 Roadster, which won 10 SCCA championships between 1967 and 1987.
American driver John Morton and his Brock Racing Enterprises team won two
SCCA Trans Am championships in a Datsun 510 in 1971 and 1972.
These were crucial to helping Nissan, a Japanese newcomer, establish
itself in a racing landscape then dominated by American and European
makers. Actor Paul Newman raced Nissan's in the 1970s and 1980s, winning
several races throughout the years, including two SCCA GT1 championships
in 1985 and 1986.
The second of the two was Nissan's 50th national SCCA championship.
The company also excelled off-road winning 19 off-road racing
championships between 1982 and 1992.
Like other foreign manufacturers, Nissan built a plant in the U.S.
in the early 1980s as companies increasingly opted to build where they
sold cars and evade import tariffs.
One such tariff introduced in the 1970s was the so-called chicken tax, a
25% tariff on all imported pickup trucks levied in retaliation for
European tariffs on American raised chicken.
Nissan's first U.S.
built pickup came out in 1983, and was made in the company's factory in
Smyrna, Tennessee.
While American companies dominate the U.S.
pickup market, Japanese manufacturers have become competitive in some
segments, particularly in what has variously been called the compact, half
size, and midsize segment.
Nissan was an innovator in this area, introducing the first extended cab
compact pickup and later the first crew cab compact on the Nissan Frontier
in 1999.
Now, crew cab pickups are a considerable share of the overall pickup
market and are considered essential variants for any truck model hoping to
succeed. Nissan came out with its first full size pickup, the Titan, in
2003. But the company distinguished itself in the U.S.
and elsewhere around the world in other ways, in part due to its growing
racing reputation.
Nissan became something of an enthusiasts choice in the 1980s and 1990s
and produced several vehicles that served the increasing interest in small
light Japanese sports cars.
The company also became an early entrant in the electric car segment
debuting the Leaf in 2010, which has won several industry awards and is
one of the top selling electric cars of all time.
But by the 2000s, Nissan was also a troubled company.
Then came a spectacular renaissance under the leadership of Carlos Ghosn,
who had risen up from running a tire company to become what many industry
insiders regarded as one of the automotive industries great larger than
life figures. Ghosn was born in Brazil to Lebanese parents and spent parts
of his early life in both countries, as well as France.
Early in his career, he took a job at French tire company Michelin and was
sent back to Brazil to improve the tire maker's operations there.
He then went to work at French carmaker Renault and became an executive
there in 1996 after overseeing a turnaround at Renault.
Ghosn left for Nissan, which many believed at the time, to be on the brink
of extinction. Renault bought a 36.8% stake in Nissan in 1999.
Ghosn joined as chief operating officer and soon took the helm of the
company. Renault's investment in Nissan drew widespread skepticism.
Two very different companies, one French and one Japanese.
Many doubted a foreigner could earn the respect and confidence needed to
successfully run a Japanese automaker.
But Nissan was desperate.
Ghosn's, first few major moves, didn't endear him to his workforce or to
the Japanese public.
He cut the company's workforce and shuttered plants.
But under his leadership, Nissan revived and transformed.
Ghosn became a hero in Japan.
There is even a best selling Japanese manga comic book that tells his life
story. The Renault-Nissan alliance, later joined also by Japanese
manufacturer Mitsubishi, became one of the world's largest carmakers.
Ghosn also embodied the image of the ultra wealthy global executive.
I think some people have attributed at least a portion of his success in
the business world to this idea that he had such widespread exposure to so
many things growing up.
And that gave him a real advantage in understanding business and people and
culture from multiple levels and multiple perspectives.
In 2005, Ghosn was appointed CEO of Renault, making him the first person in
history to be in charge of two global automakers across the world from
each other at the same time.
For a while, things looked great.
Nissan made interesting cars again.
Sales were growing, but under Ghosn's leadership, the company made a
choice that would later prove catastrophic.
He ordered that Nissan Achieve 10% market share in the United States by
any means necessary.
To do this, Nissan pumped out ever greater volumes of cars, flooding the
marketplace and increasingly relying on low pricing to meet targets.
Nissan cars became regarded as low end products in the U.S., and the
company actually lost market share over time.
Share peaked at 8.4% in 2017, then fell to 7.2% in 2019, its lowest since
2010. The decision to focus on volume rather than profits forced Nissan to
sell cars at paper thin margins and badly damaged its finances, when car
sales started to fall off their record highs in the years leading up to
2020. Their positioning, at least in the US market, was really to go after
the value oriented buyer.
This helped keep sales, you know, reasonably healthy.
But it did reduce profitability.
It was sort of interesting to watch earlier this decade, this changing
dynamic where Hyundai and Kia were sort of leaving their traditional entry
level space behind and then Nissan to some degree, kind of going in and
trying to occupy where Hyundai and Kia used to be.
Nissan also lost a hard won reputation for leadership and innovation in
some key categories, such as electric cars.
You know, when they were getting ready to launch the Leaf, Carlos Ghosn
talked about within a few years, you know, we're going to have at least 4
electric vehicles in the Nissan lineup.
We're going to be selling, you know, a million EVs a year by 2015, you
know, and a whole lot of other grand plans.
And, you know, I think he had a great vision, but somehow they were never
quite able to execute on that vision completely.
You know, the Leaf, you know, while it was certainly a pioneer, turns out,
you know, coming out at the same time as Tesla, it didn't quite turn the
world on. Its higher end Infiniti brand also suffered.
Infiniti had been regarded as a solid contender in the profitable premium
segments, at one point making sleek looking and fun to drive sports
sedans. Normally,
Nissan's story would be that of yet another automaker that made poor
decisions and miscalculations that landed it in trouble.
However, in November 2018, the story took a bizarre turn when Ghosn was
arrested at a Tokyo airport as he walked off his private plane.
He was accused of underreporting around $40 million in compensation, a
number that would grow over time.
He was also accused of misusing company funds for personal gain.
Ghosn was held in Japanese prison for long stretches in excess of 100
days. He was repeatedly questioned without his lawyer.
The practice is common in Japan, but it spurred criticism of the Japanese
justice system, which outside observers noted has a 99% conviction rate.
Ghosn called the accusations against him baseless and said the real reason
he was being targeted was to force him out of Nissan, a company still
controlled in part by French automaker Renault, which is in turn partly
owned by the French government.
Ghosn lost all of his positions in the Renault Nissan Mitsubishi Alliance.
He was briefly released from prison and placed under house arrest, but was
soon back in jail facing fresh charges.
Observers inside and outside the industry also noted that in the months
leading up to Ghosn's arrest, there were signs he was trying to draw a
Nissan and Renault closer together, possibly by merging them.
Finally Ghosn mounted an almost bafflingly daring escape from Japan while
freed on a $14 million bail.
Apparently with the direct help of two American private security agents,
both with military experience, he fled the country for Lebanon in a large
box designed for musical equipment.
While the story of Ghosn's downfall had initially focused on his alleged
impropriety, Nissan's deteriorating finances raised questions about the
condition his leadership had left it in.
Global sales volumes had risen to a post recession high of 5.7 million
units in 2017, but then they fell to 4.9 million in 2019.
Net sales have mostly fallen since 2015, from ¥12.2 trillion in that year
to ¥9.9 trillion in 2019.
Net income hit a high of ¥747 billion in 2017, then fell to ¥319 billion in
2018. The following year, Nissan posted an annual loss of ¥671 one
billion, its first loss since 2009.
The company said in July it expected to lose about the same amount of
money again in 2020 as the coronavirus pandemic dealt a painful blow to
auto sales around the world.
Nissan did not respond to a request for comment on this story.
The Ghosn does not appear to be over yet, but in the meantime, Nissan needs
to make cars and regain its footing.
The trouble is that Nissan faces some serious overcapacity problems.
In 2019, the company said it was cutting 12,500 jobs around the world as
part of an effort to reduce production by 10% in 2022.
It announced another round of 20,000 job cuts around the world, primarily
in Europe and developing countries in May of 2020.
In April of 2020, Nissan said it would temporarily lay off at least 10,000
workers at plants in Tennessee and Mississippi, nearly its entire U.S.
workforce in response to the coronavirus pandemic.
Newly appointed CEO Makoto Uchida unveiled a plan earlier in 2020 to bring
the company forward. In May 2020, Nissan said it planned to cut production
by 20% and reduce the number of global models from 69 to 55.
Apart from cutting back on production and improving its finances, Nissan
also needs new products.
Much of Nissan's lineup is aging, including once fresh vehicles like the
Leaf. Nothing great product can't fix.
And that's that's true.
You know, if you're an automotive company and whether you're already
making great product and doing fine or you're in a tailspin and doing
terribly, if you can make great product, you'd be surprised how many other
problems you could have and survive.
It plans to debut an electric crossover called the Ariya, which could help
it reestablish its reputation as an innovator and leader in
electrification. The Ariya is Nissan's first new electric vehicle in a
decade. Whereas the Leaf was a small hatchback passenger car, the Ariya is
an SUV and an auto market where sport utility vehicles of various types
are taking over. The Ariya is also an aspirational product liable to
appeal to a more high end customer.
It will start at $40,000 in the U.S.
and go on sale in that market in 2021.
They're finally launching a new electric vehicle next year in 2021, the
Ariya which you see behind me, it's a compact crossover and finally
getting electrification into a platform and a form factor that fits with
what consumers want to buy today.
Nissan also said in September of 2020, it is planning to release a new Z
sports car, a badge that gave Nissan a great deal of credibility among
performance enthusiasts.
It is also bringing some genuine innovation to the table.
The Z will be built in part with carbon fiber, a very lightweight material
typically found on higher end sports cars, but rarely so on less expensive
vehicles. Nissan says it has developed a process to produce carbon fiber
more cheaply. It could bring the material to several models in the future
and gain a considerable edge over competitors in the battle for increased
performance and better fuel economy.
Steps like these are signs Nissan knows how to lure customers back, carve
out a unique and exciting place in the market, and put people in cars by
giving them a chance to be at the cutting edge of the future.