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Nissan production shutdown delivers fresh blow to Japan Inc

[TOKYO] Nissan Motor Co's quality-control debacle deepened as the carmaker suspended production of vehicles for local sale, delivering a new blow to the nation's scandal-plagued manufacturing industry.

Nissan will halt output for about two weeks at six plants that produce an average of 1,000 vehicles a day for the Japanese market, after uncertified workers were found to have continued to carry out quality checks for weeks after the company identified the violation. The production of models for export isn't affected, the carmaker said at a briefing in Yokohama on Thursday.

The shutdown represents another headache for chief executive officer Hiroto Saikawa, who took over from Carlos Ghosn just six months ago and has personally pledged to get to the bottom of the lapses.

Japan Inc is already reeling from a scandal at Kobe Steel, which said Oct 8 it falsified data on the durability of some products - an admission that's reverberating through manufacturers of cars, planes and bullet trains.

"The existing management's responsibility now is to prevent recurrence and to normalise operations and put the company back on a growth track," said Mr Saikawa, 63. "From my point of view if I see any mistakes, I'd like to take drastic measures. This is my job and I'm the one to lead it."

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Nissan's shares fell as much as 2.4 per cent on Friday in Tokyo, while suppliers' stocks also dropped. Its bond risk rose to a six-month high on Thursday. Renault SA, which owns 43 per cent of the Japanese automaker, lost 1.9 per cent in Paris Thursday.

NHK reported on Friday that Nissan's improper inspections go back as many as 20 years. A Nissan spokesman declined to directly confirm or deny the report, referring to Saikawa's comments on Thursday, when he said Nissan's inspector training system hadn't been changed for two decades.

Nissan previously said it would call back for inspection 1.16 million cars made and sold in Japan between January 2014 and September 2017, after the government found uncertified inspectors had approved vehicle quality at the domestic plants. 

The company had estimated those recalls would cost about 25 billion yen (S$301.8 million). Nissan said Thursday that an additional 34,000 vehicles produced between Sept 20 to Oct 18 will be reinspected, at a cost of an additional 1 billion yen. Earlier this month, Nissan began selling a new version of its Leaf electric car in Japan.

The company will reconfigure the inspection process, and plans to add additional final inspectors, Mr Saikawa said. After the initial revelations, unauthorized inspections continued at four plants, Nissan said on Thursday.

An external team probing the lapses found that some plants had transferred final vehicle checks to other lines. As a result, employees who were not internally registered as final vehicle inspectors performed the checks, causing the debacle, Nissan said. Vehicles exported from Japan aren't involved in the recall because they don't require the inspection certificate, Nissan has said.

"The communication gap between management and shop floors is big, bigger than what we imagined," Mr Saikawa said. He pledged on Oct 2 to investigate the matter before deciding who should bear responsibility.

Nissan's negligence of compliance is undermining the nation's regulatory system, Japanese Transport Minister Keiichi Ishii said. The ministry will take action against Nissan after receiving report explaining the cause of issues and steps to prevent recurrence, he said.

The Japanese auto industry has been reeling from multiple scandals involving product quality and falsification of records.

In June, air bag maker Takata Corp filed for bankruptcy after one of the world's most famous recall crises.

Last year, Suzuki Motor Corp admitted to using unapproved fuel-economy testing methods in Japan, following similar disclosures by Mitsubishi Motors Corp, prompting greater scrutiny from the nation's transport ministry. This month, Kobe Steel joined the list.

The two-week suspension would dent Nissan's domestic sales by 20,000 units and erase 10 billion yen from its operating profit this year, according to Nomura Securities Co.

Nissan made 950,100 vehicles in Japan in 2016 and exported about 60 per cent of those to overseas markets.

Mr Ghosn, a Brazilian-born French national, revived Boulogne-Billancourt, France-based Renault as executive vice-president from 1996 to 1999. He then was assigned to turn around Nissan, where he reduced the company's purchasing costs, shut five factories, eliminated 21,000 jobs and invested the savings back into 22 car and truck models in three years.

For Mr Saikawa, the CEO job caps a four-decade career with Nissan, which he joined from Tokyo University. He served on the board of Renault, Nissan's biggest shareholder, between 2006 and 2016, a period when the alliance came under pressure from the French state, which had increased its stake in Renault without informing Mr Ghosn.

Mr Saikawa led Nissan's negotiations with Renault and the French government in 2015 to address an imbalance in the alliance's ownership structure: the now more profitable Japanese partner had no voting rights for its stake in the French carmaker.

A crisis was averted after the French state pledged not to interfere in Nissan's governance.


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