Nissan’s destiny remains hitched to the wagon of globalization
This sputtering carmaker was a paragon of globalization once, with its fortunes revived by a French-Brazilian-Lebanese chief. But the Carlos Ghosn scandal still haunts Nissan, even as its business remains too globalized for an era of protectionism.
In retrospect, you can put a date on the moment globalization peaked: 24 January 2018. In the rarefied winter air of Davos, Switzerland, Carlos Ghosn—then boss of the sprawling alliance of Nissan, Renault and Mitsubishi—was asked what he thought of a tentative initial round of tariffs on washing machines and solar panels imposed by Donald Trump in his first term as US president.
Flush with the confidence of delivering sales results confirming that 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, Ghosn seemed untroubled. “I don’t see anything that is going to lead to a heavy significant burst of protectionism," he told Bloomberg Television.
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The tectonic plates, however, 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 finalize the separation of its French and Japanese limbs.
With Nissan’s announcement of a ¥670.9 billion ($4.5 billion) loss last Wednesday alongside a promise to close seven of its 17 factories, one of the world’s great carmakers may be approaching its endgame.
That’s certainly the judgement 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 market cap is less than the ¥1.5 trillion 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 CEO Ivan Espinosa, just months into the job after his predecessor Makoto Uchida stepped down following an abortive merger attempt with Honda, is touting the company’s third restructuring plan in five years. It won’t be enough to stanch the bleeding.
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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 Nissan’s latest annual results announcement was consumed with updates on his case.
That’s 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 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’s hoping to turn this around with a focus on plug-in vehicles, but Nissan is starting from so far back it’s barely visible. The company sold 12,641 EVs and plug-in hybrids in China last year, giving it less than 0.1% 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.
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That won’t work for Nissan, which is still too global for the protectionist competitive landscape we’re living in. It’s a Japanese business only in name: Despite accounting for 45% of jobs and about 35% of manufacturing assets, just 16% of sales are at home. Most of its revenues are in North America, and about 30% of the vehicles produced in its Japanese factories are exported to the same market. Trump’s 25% 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 globalization. Under the surface, though, nationalism never really went away. For all the purely corporate failures that led to Ghosn’s downfall, a shadowy proxy war between factions of the French and Japanese governments contributed just as much.
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Nissan’s rivals don’t have much opportunity to enjoy schadenfreude. A world where 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
The author is a Bloomberg Opinion columnist covering climate change and energy.
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