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Nissan-Renault alliance

Nissan chief says new models, not discounts, key to revival

Makoto Uchida takes over as CEO amid US sales slump

Nissan CEO Makoto Uchida speaks at a news conference at its headquarters in Yokohama, Japan, on Dec. 2.   © Reuters

YOKOHAMA -- Makoto Uchida, the new CEO of Nissan Motor, promised a re-invigorated alliance with Renault, an end to the short-term pursuit of profits, and an embrace of what he called his three core values of "respect, transparency and trust" as he took charge of the troubled Japanese carmaker.

"The alliance with Renault is an important competitive strength of Nissan... I will push for further evolution of the alliance," Uchida said on Monday in his debut press conference. "We will push ahead with further cooperation while maintaining the independence of each company," he added.

Once touted as the most successful auto alliance in history, Nissan's tie-up with Renault was severely battered by the arrest in November 2018 of the charismatic then-chairman Carlos Ghosn on charges of financial misconduct.

The arrest triggered a bitter management struggle for control between the Japanese automaker and its French parent, ruining both the health and the reputation of the partnership. Ghosn's successor as CEO, Hiroto Saikawa was also subsequently forced out. A new tripartite management team with Uchida at its head formally took over on Dec. 1.

The carmaker's tripartite management team -- which comprises Uchida, Chief Operating Officer Ashwani Gupta and vice COO Jun Seki -- faces a series of daunting tasks to turn around the business, which is currently suffering from its worst slump in profits in a decade.

The company recently slashed its dividend and forecast that net profits for the year ending March 2020 would fall 66% to 110 billion yen ($1 billion). Renault owns 43% of the company.

Nissan's sub-performance is especially acute at its North American business, which is suffering from weak sales after excessive discounts under Ghosn, an approach that Uchida, who previously headed Nissan's China business, criticized.

"Marketing activity that relies on sales incentives has undermined profitability and the brand image," he said. "New models are the key to revival of our business," he emphasized.

But returning to growth will likely be a challenging prospect as Nissan is also under pressure to cut costs after it aggressively expanded production capacity under Ghosn. Some factory operating rates have fallen to a dismal 69% level -- below the key 70% threshold normally required to keep plants operating.

A plan was announced in July to reduce production capacity at 14 plants around the world, cut vehicle production by a tenth, and slash the payroll by 10%. However, independent board directors have said that more needs to be done.

Without spelling out details, Uchida suggested that there might be a possible review of the current six-year business plan 2017-2022.

One prerequisite to a successful turnaround is a strong partnership with Renault. "Nissan has grown so big thanks to the partnership," Uchida said. But he also emphasized that each company would retain independence, saying that "no discussion is taking place on possible business integration with Renault."

Earlier this year, Renault proposed that the Japanese and French companies integrate operations. But Nissan said it wanted more autonomy and asked Renault to reduce control. Outgoing chief executive Hiroto Saikawa has blamed Japanese nationalist forces inside the company for Nissan and Renault's deteriorating relationship.

Governance reform is also a work in progress. The previous CEO, Saikawa, had to step down over his compensation package, even after he had accused his former boss, Ghosn, about his own compensation package. Uchida pledged a new era. "Respect, transparency and trust are the three important words I live by," he said.

The turmoil comes as the global auto industry is undergoing radical change, driven by new technologies and services epitomized by the acronym CASE (connectivity, autonomy, sharing and electrification), which are reshaping the sector.

COO Gupta also said the company would refocus on these kinds of products. "We will release new models packed with intelligence mobility features," he said. "2019 is an important year to prepare for [new growth]."

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