Nissan was dealt another blow last week when word leaked out to the Financial Times that Ashwani Gupta, its chief operating officer and number two in command, was being pushed out in what appears to be another palace coup.
Gupta, 52, will officially step down on June 27 after a short and undistinguished career at the automaker. Previously serving in executive capacities at Renault and Mitsubishi Motors, Gupta was named COO on November 1, 2019, replacing Yasuhiro Yamauchi in a management shakeup that took effect on December 1 and also elevated Makoto Uchida to president and CEO.
Nissan had been forced to make changes after losing its top three executives — first Carlos Ghosn and Greg Kelly as part of a management coup in November of the previous year, 2018, to block the merger with Renault, and then CEO Hiroto Saikawa at the September 2019 board meeting for receiving a 47 million yen windfall from a backdated shareholder appreciation rights (SARs) bonus.
Another recent twist in the ongoing Nissan saga: Ghosn has sued the company for $1 billion in a Lebanese court. Lebanon is where he has lived since fleeing Japan while out on bail awaiting trial on criminal charges, which he and his lawyers say (with strong evidence to back them up) were part of a Nissan management faction’s coup d’etat aided and abetted by elements of the Japanese government.
Ghosn, Kelly and Saikawa were all representative directors at the time of Ghosn’s and Kelly’s arrests on November 19, 2018. Nissan had three representative directors (daihyo torishimayaku in Japanese) on its then nine-member board. In June 2019, the automaker expanded the board to 12, with a majority coming from outside the industry, as the board shifted focus to governance.
Only three directors, including Gupta and Uchida, came from the industry. Now, there will be two. The current frontrunners to replace Gupta, according to our sources, are Guillaume Cartier, who chairs the management committee running Nissan’s business in Europe, India, the Middle East, Africa and Oceana, and Jeremie Papin, president of Nissan North America Inc. and chair of the management committee for the Americas region.
Cartier is believed to be the top choice.
To elevate one of them to the board will require an extraordinary shareholders’ meeting since the agenda for the June 27 meeting has already been set and includes the addition of one new outside director and the retirements of two, bringing the total down to 10.
Moreover, market share fell to 5.5% in the US and 2.1% in Europe.
In fiscal 2017, the last full year Ghosn was in management, Nissan’s share in the two markets (including Infiniti sales). Meaning: The automaker has lost ground to the competition.
Globally, market share fell to a 50-year low, to 4.1%. And while Nissan is profitable again, posting a 3.6% operating profit margin, its margin is lower than every major automaker outside China except Honda and, in Honda’s case, only if one excludes its profitable motorcycle business.
Thus, it is hard to grade Gupta’s tenure because the company, in addition to being profitable again, is generating positive cash flow, with an estimated 1 trillion yen in the bank.
For that reason, there remain questions about why Gupta is being removed. We reached out to Nissan and didn’t receive a response.
However, the FT reported that Gupta was vying for the CEO’s job. We have been told that Gupta wasn’t shy about promoting himself, but have never interviewed him. On the other hand, Nissan had co-CEOs (Saikawa and Ghosn) from October 2016 through March 2017; Ghosn moved up to chairman in April. So there is some precedent for sharing the title and dividing responsibilities.
The FT also reported without offering details that there had been “complaints” against Gupta. Given Nissan’s history of leaking negative information about Ghosn, we believe that one should take such reports with skepticism.
It was on May 18 (first reported Tuesday of this week by Blooomberg) that Ghosn filed a $1 billion damages suit in Lebanon against Nissan and 12 executives including Hari Nada, Masakazu Toyoda and Motoo Nagai.
All three, the latter two as outside directors, were involved with planning the coup and/or the coverup that followed.
Nagai, who chairs the board’s audit committee, shut down the internal investigation when Christina Murray and Ravinder Passi, Nissan’s global compliance chief and global general counsel, turned their attention to Nada, who had entered an immunity agreement with the Tokyo prosecutors’ office several weeks before Ghosn’s arrest and never informed the board.
Nada is still a corporate officer with the title of senior vice president. Nagai, who reportedly was involved with Gupta’s ouster, will remain on the board. Toyoda, a former government bureaucrat, will retire.
A more likely reason for Gupta’s removal, according to our sources, is that Renault wanted him out. According to our sources, Gupta wasn’t acceding to Renault’s demands following changes made to the alliance structure in February whereby all decisions must be consensual.
Although considered to be the most talented auto executive on Nissan’s board, he was taking a hard line with his former employer. Gupta joined Renault in 2006, then switched to Mitsubishi Motors (the third member of the alliance) in 2019 before joining Nissan.
Among the issues in dispute: Nissan’s extensive intellectual property, to which Renault wants greater access, and Nissan’s active involvement in Renault’s Ampere EV project including taking a minority 15% equity stake.
Renault is moving forward with the project, having announced this week (June 19) that its CEO, Luca de Meo, will be the future chairman and CEO of Ampere. De Meo will hold both positions, while Renault’s chairman, Jean-Dominique Senard, has been tasked with setting up a committee to oversee the initial public offering. Senard, a former tire industry executive, serves concurrently as vice-chair of Nissan’s board.
According to one of our sources, Uchida is perceived to be “more pliant” than Gupta.
Not clear, looking at the market, is how Ampere will benefit Nissan. The Japanese automaker’s main markets outside Japan are China and the US, not Europe. And both automakers have seen their EV shares fall globally to less than 2%, according to EV Volumes.
CLSA analyst Chris Richter warns:
If Gupta’s misgivings about investing in Ampere and keeping Nissan’s IP secure were truly behind his departure — granted, the FT article cites other issues as well — we would note that many of Nissan’s minority shareholders share the same concerns and wonder how strongly independent board members who were allegedly behind his removal are serving Nissan’s minority shareholders….
Optics of the Gupta situation are really terrible because they focus on the wrong things — palace intrigue, investigations and backstabbing. They also ignore the fact that Nissan has potent competitors. While the industry is undergoing the biggest change in a century — it is going to be difficult for anybody in industry to survive — Nissan is wasting time.
I worry that they’re not going to be able to hire somebody of equal competence. Nissan’s got a lot of work to do and the competition isn’t waiting for them. Gupta was the point man driving forward Nissan’s advancement on profits, new products and electrification….
Cash flow has been getting consistently better. That’s been good news. It means their transformation plan is working and they appear to be on a road to recovery [but] Nissan doesn’t benefit from this kind of instability. The loss of Gupta is significant.
Roger Schreffler is a veteran of nearly four decades as a Japan automotive correspondent and is a former president of the Foreign Correspondents’ Club of Japan.
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