YOKOHAMA, Japan -- Nissan President and CEO Makoto Uchida says the automaker will "take advantage of the scale of the alliance" with Renault and Mitsubishi Motors in electrification technology, which he sees as a source of future revenue. He also says electrification may drive a restructuring in the auto industry and didn't deny the possibility of expanding the alliance.
Because of a failed expansion strategy, Nissan is expected to post losses of more than 600 billion yen ($5.68 billion) in the fiscal year that ends March 2021, the second straight year in which losses have topped that level. During its 1999 deterioration of earnings and financial conditions, Nissan received financing from Renault, and the French company's Carlos Ghosn was sent in to improve the Japanese automaker's performance.
After that, Nissan pursued a strategy that called for grabbing an 8% share of the global market, but its performance worsened because it had plants around the world with low capacity utilization rates. Then-CEO Hiroto Saikawa took full control of Nissan in 2018 after Ghosn's arrest on charges of misrepresenting his compensation, but he too stepped down in September 2019 after issues arose about his own compensation.
Uchida became president and CEO in December 2019 in the midst of this management turmoil, coming from the post overseeing the company's business in China -- its main market -- and working on joint projects with Renault.
In May 2020 he announced Nissan Next, a four-year medium-term management plan that aims to close and downsize plants around the world, including the closure of plants in Indonesia and Spain, reduce global production capacity by 20% from fiscal 2018's 7.2 million units by fiscal 2023, and achieve an operating profit margin of 5%.
Nissan Next is "crucial to getting Nissan, which is often described as 'at a cliff's edge,' back on a growth trajectory," said Uchida in an exclusive interview with Nikkei Asia.
"Since May, we have made progress in reducing fixed costs as planned," he added. "As for the recovery of our North American operations, we are working to improve the quality of sales" by reducing sales incentives and through other measures, "and the wheels have started turning such that we can execute our plan."
On the impact of the coronavirus, "The drop in sales has not been larger than expected, but we need to carefully monitor the situation," said Uchida, who worked at the Japanese trading house Nissho Iwai, now Sojitz, before moving to Nissan in 2003.
As its financial performance deteriorated, Nissan's automotive business had a deficit in free cash flow of about 640 billion yen in the fiscal year ended March 2020, and a deficit of more than 800 billion yen in the April-June period. The company raised 900 billion yen from Japan's three megabanks, the Development Bank of Japan and others, and issued more than 1 trillion yen of corporate bonds in the U.S. and Europe in September. Uchida said he expects the series of fundraising to "cover our immediate financing needs."
Asked how Nissan will compete with rivals in other countries that are larger and in better financial shape, Uchida said Nissan will "focus on our highly competitive midsize segment, electrification and driver assistance technology, and ensure customers are aware of the value of our products."
But he acknowledged that electric vehicles "have challenges" in terms of profitability and said that along with Nissan's independently developed hybrid vehicle e-Power, Nissan will work with Renault and Mitsubishi Motors, in which it has stakes, to "increase the ratio of common electric parts through the alliance. We will pursue the benefits of scale of all three companies, not just Nissan's [annual sales volume of] 5 million units."
Asked about the possibility of providing electrification technology outside of the alliance, Uchida said: "There may be a reorganization in the future. We have to be on the lookout for various opportunities."
Electric vehicles like the Leaf, which debuted in 2010, are at the heart of Nissan's environmental vehicle strategy to compete with Toyota and other Japanese rivals that mostly have put more attention on hybrid vehicles. The company worked hard to develop the market, selling a total of 500,000 units worldwide.
But it is now outpaced by U.S.-based Tesla, which specializes in electric vehicles and has become the world's largest automaker in terms of market capitalization. The rise of Tesla also implies that evaluation criteria continue to change from traditional metrics, like sales volume and profit margins.
"Their strength is in breakthroughs," Uchida said of Tesla. "The way they develop cars and the ideas they come up with are totally different. We can learn a lot from them in that respect."
Nissan unveiled its new electric vehicle, the Ariya, in July, and in September it shared a prototype of a new version of the legendary Fairlady Z sports cars.
Uchida said of the Leaf's 2010 debut: "It's great that we could release it at that point in time. But back then charging systems and other infrastructure weren't in place, and it was too early to capture the market." He went on to express his confidence in the Ariya, saying, "We've packed it with all of the EV technology we've developed over 10 years with the Leaf, along with other technologies from the GT-R and other sports cars."
Discussions about Nissan's future after the current restructuring have begun inside the company, Uchida said. "I would like the management plan after Nissan Next to present a clear vision," he said. "The Ariya will be the car that represents that."
But relations between Nissan and Renault deteriorated in the aftermath of the arrest of Ghosn, a key figure in the coalition. In April 2019, Renault pressed Nissan to merge its operations, and the battle for managerial control came to the fore. After that, however, performance at both companies rapidly worsened, and they began reconsidering the alliance strategy.
In May 2020, Nissan, Renault and Mitsubishi Motors agreed to come up with a new medium-term management plan. The three companies said each will take the lead in their main sales regions, the models and technologies under development.
"We're now concentrating on how to grow Nissan. Both Renault and Mitsubishi are in the same boat," Uchida said of the changes in the relationship with Renault. "We have discussed strategies for the alliance, but we're not talking about reconsidering our capital relationship."
Additional reporting by Hiroyuki Koizumi and Eri Sugiura.