Nissan is dying and taking globalisation with it
IN RETROSPECT, you can put a date on the moment globalisation peaked: Jan 24, 2018.
In the rarefied winter air of Davos, Switzerland, Carlos Ghosn – then boss of the sprawling alliance of Nissan Motor Co, Renault and Mitsubishi Motors Corp – was asked what he thought of a tentative initial round of tariffs on washing machines and solar panels imposed by President Donald Trump.
Flush with the confidence of delivering sales results confirming the alliance was the world’s biggest car group by volume, and with his eye on a unification of the business under a single corporate roof, he seemed untroubled. “I don’t see anything that is going to lead to a heavy significant burst of protectionism,” he told Bloomberg Television.
The tectonic plates were already shifting. Within weeks, Nissan insiders had started the internal investigations that would lead to Ghosn’s arrest later that year and dramatic escape from Japan in 2019.
The fractured group has since spent the best part of a decade trying and failing to finalise the separation of its French and Japanese limbs. With Nissan’s announcement of a 670.9 billion yen (S$6 billion) loss on Wednesday (May 14) alongside a promise to close seven of its 17 factories, one of the world’s great carmakers may be approaching its endgame.
That is certainly the judgment of investors. The stock is now trading like scrap metal, at less than a quarter of the value of the assets on its books. Its debt is also junk, in the view of all three major ratings companies. Its 1.3 trillion yen market cap is less than the 1.5 trillion yen value of its net cash. If you bought Nissan shares at almost any time since 1975, you would currently be sitting on paper losses.
New chief executive officer Ivan Espinosa, just months into the job after his predecessor Makoto Uchida stepped down following an abortive merger attempt with Honda Motor Co, is touting the company’s third restructuring plan in five years. It is mostly a reheated version of the last programme Uchida put forward six months ago, before his departure. It will not be enough to stanch the bleeding.
The opportunity to fix this was during the previous seven years, when the global car industry was undergoing its most dramatic revolution since the dawn of the internal combustion engine. But throughout that period, Nissan was consumed by the fratricidal bitterness left over from Ghosn’s ouster. Even now, roughly one-sixth of the latest annual results announcement was consumed with updates on his case.
That has left the business stuck in the past. At that 2018 Davos meeting, Ghosn could claim to be running the world’s biggest maker of electric cars. Nissan has barely grown electric vehicle (EV) sales since.
Espinosa’s latest plans to revive its China unit seem like a bad joke, too: sales there have fallen by about half since 2019. He is hoping to turn this around with a focus on plug-in vehicles, but Nissan is starting from so far back it is barely visible. The company sold 12,641 EVs and plug-in hybrids in China last year, giving it less than 0.1 per cent of the local market and failing to crack the top 60 local new-energy vehicle brands.
Detroit has dealt with the turbulence of the past decade by retreating to its home market to lick its wounds. That will not work for Nissan, which is still too global for the protectionist competitive landscape we are living in.
It is a Japanese business in name only: despite accounting for 45 per cent of jobs and about 35 per cent of manufacturing assets, just 16 per cent of sales are at home. More than half of revenues are in North America, and about 30 per cent of the vehicles produced in its Japanese factories are exported to the same market. Trump’s 25 per cent tariff on auto imports are more than sufficient to wipe any profits from that trade.
Nissan’s revival since 1999 by a superstar French-Brazilian-Lebanese executive was a parable for the successes of globalisation. Ghosn himself was felt for years to embody “Davos Man”, the globetrotting bosses who made a pilgrimage to a Swiss ski resort for the annual World Economic Forum. Under the surface, though, nationalism never really went away. For all the purely corporate failures that led to its downfall, a shadowy proxy war between factions of the French and Japanese governments contributed just as much.
Its rivals do not have much opportunity to enjoy the schadenfreude. A world where the major carmakers hibernate at home will be an unfriendly one for almost every national champion except those from China, the one place with the scale, manufacturing expertise and technological edge in EVs to dominate all others. The world’s best chance of holding back this competitive onslaught was to work together across borders. The collapse of Nissan extinguishes all remaining hope of that future.
New great powers typically rise to dominance while the old order squabbles obliviously. With auto companies, as with nation states, we are seeing that pattern play out again. BLOOMBERG
