Nissan of Japan Discloses a New Recall, Adding to Its Problems

Posted June 27, 2019 12:05 p.m. EDT

TOKYO — Nissan on Thursday revealed two new blows to its embattled management, as it announced a recall of 490,000 vehicles in Japan and disclosed that its shareholders remain split over its chief executive, Hiroto Saikawa.

The recall over an electrical issue is the second largest of nine this year. The problem stems from a design flaw, but serves as a reminder of the troubled Japanese automaker’s struggles with quality as well as management issues. So far in 2019, Nissan has recalled more than 1.5 million vehicles in Japan.

Nissan has faced challenges on different fronts. The November arrest of the company’s former Chairman Carlos Ghosn for allegations of financial wrongdoing exposed huge dysfunction in its governance. It has also suffered from plunging profits and a string of quality scandals.

No deaths or injuries have been reported in relation to the electrical problem. Nissan said a fault in the electrical system could lead to a risk of fire in some Japanese models of vans and minivans, including the Serena, the NV200 van and Cube.

The carmaker has suffered from quality concerns in recent years. In 2017 it admitted that uncertified technicians had been conducting inspections of new vehicles, and last year it said inspectors falsified product-quality data.

Ghosn has criticized the executives who once worked for him, accusing them of mismanagement, including of quality control. Saikawa has broadly blamed performance problems during his time as chief executive on Ghosn.

The problems are among several that have led to growing scrutiny of the leadership of Saikawa, who has transformed from Ghosn’s faithful lieutenant into one of his biggest critics. Saikawa now faces questions about whether he was aware of Ghosn’s wrongdoing, as well as allegations about his own behavior at the company.

In the lead-up to Tuesday’s meeting, two proxy adviser firms called for shareholders to make a clean break with the Ghosn era by voting out Saikawa.

Adding to his troubles, Nissan’s former head of human resources, who has been charged alongside Ghosn, accused Saikawa of manipulating Nissan’s stock-based compensation to increase his own compensation.

Saikawa has not commented on the allegations. Ghosn and Kelly have both said they are innocent of the charges against them.

Nissan on Thursday released detailed results of a shareholder vote Tuesday, which included a decision on whether to reappoint Saikawa to the company’s board of directors. The results suggested that the company’s investors — other than Renault — remain lukewarm on Saikawa’s ability to handle the company’s problems.

Saikawa received about 78% of votes cast during the meeting, the company said Thursday in a report to the Tokyo stock exchange. More than half of those votes came from Renault, which controls more than 43% of Nissan’s stock and is obligated by the terms of its partnership with the Japanese automaker to support its board appointments.

At the previous meeting in 2017, Saikawa received roughly the same amount of support.

At the meeting’s question-and-answer session, attendees focused their frustration on Renault and its chairman, Jean-Dominique Senard.

Shortly before the meeting, Senard threatened to block Nissan’s governance overhaul unless the company gave seats on the newly established committees to himself and Renault’s chief executive.

Nissan caved, but the power play further damaged the companies’ relations, which had already been hurt by Renault’s efforts to push Nissan into a merger. An outright merger has been long opposed by Saikawa, the Japanese government and some of the company’s shareholders.

Nonetheless, shareholders overwhelmingly approved Senard’s appointment to Nissan’s board Tuesday. He received 99% of the vote.

Much of the pressure for a merger has come from the French government, which is Renault’s largest shareholder.

Speaking to reporters in Tokyo on Wednesday night, President Emmanuel Macron of France praised French and Japanese workers and said that cooperation between Nissan and Renault must increase as they face the challenge of a changing auto industry.