- CEO Makoto Uchida could very well fall on his sword—whether or not Nissan’s board is still interested in a tie-up with its larger domestic rival.
Japanese carmaker Honda Motor is reportedly demanding Nissan jettison CEO Makoto Uchida as a condition for reopening acquisition talks that could create the world’s third-largest carmaker by vehicle sales.
On Tuesday, the Financial Times reported Honda boss Toshihiro Mibe’s relationship with his counterpart deteriorated after the former began to understand the scale and breadth of the company’s financial mismanagement.
While Nissan declined to comment to Fortune, and Honda could not be reached, Uchida could very well fall on his sword—whether or not Nissan’s board is still interested in a tie-up with its larger domestic rival.
Pressed last week by reporters whether he should step down following the collapse of merger talks, the CEO declared his intention to remain in the post potentially through next year to ensure Nissan was firmly on the path toward recovery.
However, should employees and shareholders conclude that he is impeding a successful turnaround, the Japanese executive stated he would naturally stand aside.
“If everybody says we no longer need Uchida-san,” he said, using the customary Japanese honorific, “it’s not my intention to hang on to this position—if that happens, please fire me.”
Cash crunch leads to fears of debt default
Nissan’s position in the industry peaked during the successful era of former CEO Carlos Ghosn.
Following his shocking arrest in November 2018, which the Brazilian-born Lebanese national claimed was purely political, fortunes began to wane under successor Hiroto Saikawa.
Uchida, then head of its Chinese operations, was brought in, in December 2019, to steer the carmaker back on track. But the subsequent five years have seen the company’s performance tumble and, with it, the share price.
Last week, Uchida was forced to warn operating profits in the fiscal year through March would plunge to just 120 billion yen ($791 million) from an initial forecast of 600 billion issued last May, as the carmaker suffered a hefty 9% drop in vehicle sales in China.
Its reserve of cash to pay day-to-day operations is running thin as well.
Nissan was forced to raise funds in November by liquidating a chunk of its stake in Mitsubishi Motors, equivalent to a tenth of its overall shares. (According to Japanese media, Honda’s interest is mainly in Nissan’s partner, owing to its plug-in hybrid technology and share of the Southeast Asian car market.)
Its survival is now in doubt.
On Tuesday, the cost for bondholders of Nissan to insure themselves against a potential default rose to the highest level for any major corporation in Japan, according to data from Bloomberg.
Full-scale acquisition would have benefited Honda
During negotiations, Honda suddenly proposed changing the integration structure from the framework initially. To realize synergies quicker, Honda suggested revising the deal to a complete acquisition of Nissan.
Uchida said his board, which had hoped the deal would be a win-win that strengthened both companies, considered the new proposal but ultimately rejected it, believing a full-scale takeover would have benefited Honda first and foremost.
“With the proposal suggesting that Nissan would become a wholly owned subsidiary of Honda,” the Nissan CEO said, “we were not confident that our autonomy would be preserved or that Nissan’s potential could truly be maximized.”
Currently, Nissan only terminated discussions with Honda over a full-scale corporate integration. They remain in talks over a strategic partnership first announced in August of last year.
Uchida has said Nissan cannot, as things currently stand, survive on its own.
As a result, it is exploring partnerships not just with other carmakers but completely outside of the industry. He said he was even open to potential cooperation with Taiwanese contract manufacturer Hon Hai Precision, known abroad as Foxconn, should that improve Nissan’s footing.
Once he felt Nissan’s future was secure, the CEO said he would make way for a new leader at the top of the company.
“My mission is to stop the deterioration and turnaround the performance and then hand on the baton to my successor,” Uchida said. “Just stepping down without any improvement is a bit irresponsible.”
