Nissan shuts Japan production as Saikawa's crisis worsens

[TOKYO] Nissan Motor Co will suspend production of all vehicles in Japan for sale in the local market for about two weeks as the crisis from the company's faulty vehicle-quality inspection process worsens for new Chief Executive Officer Hiroto Saikawa.

Local production at six facilities in Japan, which make an average 1,000 vehicles a day for the domestic market, will halt immediately as Nissan continues to investigate how unauthorized workers certified the final quality of vehicles to be sold in Japan. Production of export models won't be stopped, the carmaker said at a briefing in Yokohama Thursday.

Shares of Nissan and its biggest shareholder Renault SA traded lower in Europe as the three-week-old debacle worsens for Saikawa, who took over from turnaround specialist Carlos Ghosn in April. Nissan's announcement comes as Japan Inc reels under another industrial scandal with Kobe Steel Ltd saying it falsified data on durability of some products. That admission is already reverberating through manufacturers of cars, planes and bullet trains.

Nissan has said it's already calling back 1.16 million cars made and sold in Japan between January 2014 and September 2017 for inspection, after the government found uncertified inspectors approved vehicle quality at its domestic plants. Even before Thursday's shutdown announcement, the company had said the recalls will cost about 25 billion yen (S$300.4 million).

"The existing management's responsibility now is to prevent recurrence and to normalize operation, and put the company back on a growth track," Mr Saikawa said. "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." Shares of Nissan fell almost 3 per cent in Europe from Japan close, while Renault, which owns 43 per cent of the Japanese automaker, tumbled 2 per cent.

The automaker will increase the number of final inspectors, Mr Saikawa said. The company chose an estimated two-week shutdown period because that's the time Nissan needs to reconfigure the final vehicle inspection line. An additional 34,000 vehicles produced between Sept. 20 to Oct 18 will be reinspected, costing an additional 1 billion yen.

An external team that's also investigating 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.

Saikawa said Oct 2 he will personally investigate to get to the bottom of the issue before deciding who should bear responsibility for the "shocking" lapse.

Nissan said this month there have been instances of unauthorized inspectors, who usually work under the supervision of a certified inspector, working alone and stamping final inspection paperwork. There were also multiple copies of such stamps used for paperwork for vehicles for the Japanese market, it said. Vehicles exported from Japan aren't involved in the recall as the certificate is a Japan-specific requirement by the ministry, Nissan has said.

"The communication gap between management and shop floors is big, bigger than what we imagined," Mr Saikawa said.

After the initial revelation, unauthorized inspections continued at a total of four plants, the company said.

The Japanese auto industry has been reeling from multiple scandals involving product quality and falsification of records. In June, airbag 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 by the nation's transport ministry. This month, Kobe Steel Ltd joined the list.

Mr Ghosn, a Brazilian-born French national, revived Boulogne-Billancourt, France-based Renault SA 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 back in 1977. He served on the board of Renault, Nissan's biggest shareholder, between 2006 and 2016, during which the alliance came under pressure from the French state, which had increased its stake in Renault without informing 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 government pledged not to interfere in Nissan's governance.

BLOOMBERG