Automaker lowers outlook, books charges related to Ghosn
Nissan’s charge reflects costs of deferred compensation it says he was promised
YOKOHAMA, JAPAN—Nissan Motor Co. created a reserve of more than $80 million for deferred pay that prosecutors in the criminal case against former Chairman Carlos Ghosn say the executive was promised and the auto maker should have disclosed.
The move came as Nissan further unwound the legacy of its longtime chief, saying it would reverse ambitious U.S. sales targets pushed by Mr. Ghosn and reconsider parts of plans to deepen its alliance with France’s Renault SA.
Tokyo prosecutors have charged Mr. Ghosn with failing to report ¥9.2 billion ($83 million U.S.) in deferred compensation over eight years of Nissan’s financial statements. Mr. Ghosn, who denies the allegations, has said the money was never promised to him and there was nothing to report.
Part of Mr. Ghosn’s defense is that if Nissan really intended to pay him compensation after his retirement, it would have put aside reserves to prepare for that day. That is what the company did Tuesday—belatedly, since the money was committed as long ago as 2011, according to prosecutors’ charges.
Nissan Chief Executive Hiroto Saikawa said Tuesday the company had yet to decide whether it will actually try to give Mr.
Ghosn the money. He suggested it was unlikely. “I personally don’t think we will conclude that we will pay the money,” he said.
Nissan has worked closely with Japanese prosecutors since last summer in building a case against Mr. Ghosn. The company also helped facilitate the surprise arrest on Mr. Ghosn on Nov. 19, according to people at Nissan familiar with the events.
Nissan’s board stripped Mr. Ghosn of his chairman title in November. He remains in a Tokyo jail pending trial or release on bail.
The company has been accused by many of orchestrating a coup to remove Mr. Ghosn and prevent a merger with alliance partner Renault. In interviews this month with Japanese and French media, Mr. Ghosn said he had been planning to create a holding company that would own all the shares of Nissan, Renault and the third alliance partner, Mitsubishi Motors Corp.
Mr. Saikawa has denied that Mr. Ghosn’s arrest was a coup, saying the company acted appropriately after discovering financial wrongdoing. He has said he wants all the alliance companies to continue to be independent.
In his later years at Nissan, Mr. Ghosn pushed for a rapid increase in sales volume and sought to combine many of the headquarters functions of Nissan and Renault. The core of that strategy was increasing Nissan’s U.S. market share, its most important market at the time.
Mr. Saikawa said the marketshare push was responsible for Nissan’s current thin profit margins. The company on Tuesday projected that its operating margin would fall to 3.9% for the year ending March 31 from 4.8% last year.
He singled out problems in the U.S., the source of around 40% of Nissan’s profits. Sales grew but profitability shrank as Nissan handed out more incentives to buyers, such as lower interest rates on loans, and increased low-margin fleet sales to rental car agencies and others.
While the U.S. car market is expected to shrink this year, Nissan is projected to shed market share, which Mr. Saikawa said was an unavoidable side effect of his plan to boost profits by slashing financial incentives and fleet sales.
Mr. Saikawa said he was also considering potential changes to how Nissan works with the alliance.
Since 2014, the alliance partners have been working to converge functions such as engineering, parts purchasing and human resources.
“I’m doing soul-searching on whether or not convergence is the most efficient structure. We need to revisit it in some way,” Mr. Saikawa said.
He didn’t give details but said alliance targets for research and technology spending set by Mr. Ghosn should be kept.
In 2017, Mr. Ghosn said that by 2022 three-quarters of alliance vehicles would have shared engines, up from around a third at the time. More than half would be built on a vehicle platform codeveloped by the companies, he said.
Mr. Ghosn also had set another big target, calling for the three alliance partners to sell 14 million vehicles annually by 2022. Mr. Saikawa didn’t comment on that goal but said Nissan may revisit some numerical targets.