The chief executive officer of Nissan, Ivan Espinosa, has been an unwilling spokesperson of reason in the most tumultuous times the organization has witnessed in decades. The future of the brand also cannot be predicted exactly, and recent statements of the Nissan CEO suggest that the prospect of selling Nissan cannot be ruled out. With the company on the verge of incurring a net loss of $4.2 billion at the end of the fiscal year, March 31, Espinosa is breathing some reality into the situation by stating that the company faces a level of flexibility it has never had before in the industry that is struggling to keep up.
Nissan does not pride itself on its financial misfortunes. Projections of the company that are made in the current fiscal year have indicated a loss marginally less than that the company experienced a year ago, which was 4.5 billion dollars. Although the difference may not seem big on paper, it is an indication of a modest change in a worsening crisis. The brand has already been executing a comprehensive reorganization process, including closing at least 7 plants across the globe and two design studios, and asking about 20,000 employees to leave. However, the figures themselves still give a gloomy picture, and the restructuring is not yet able to create a decisive turnaround.
Espinosa admitted to the Financial Times that it is a gigantic task to operate the company on a day-to-day basis, the tone of which suggests the tension that swirls around each decision made at the headquarters of Nissan. It is so complicated with so many things happening, it is scary, he added, pointing to the complexity that comes with a global, multi-brand operation that is undergoing a very fast evolution in consumer expectations, electrification needed, and intense competition on one hand and the other.
The problems facing the automaker are not financial only. Nissan has been grappling with a divided brand image, doubts of product quality, and a lack of relevance in an ever-more-sustainable and digitally connected world. Espinosa said it is becoming increasingly difficult to remain relevant in this environment and particularly within a company of our size. You must be open and flexible. It might be a death sentence to have a strict approach in a market where carmakers are compelled to make rash choices about whether to invest in electric vehicles or place an autonomous technology bet.
When asked about possible radical action like the sale of the brand to a new partner or even a private equity group, Espinosa was frank and said, “Anything can happen in this madcap world.” The comments are a reverberation of the uncertainty that appears to be floating over Nissan. There were a number of strategic options on the board that were considered some years back, such as forming a partnership with Honda that eventually collapsed due to deadlock in negotiations. The present ownership structure is a maze: Nissan is owned by Renault in 35.71%, with 17.05% belonging directly to the French carmaker and 18.66% belonging to a French trust, the beneficiary of which is Renault. This framework has been known to offer the comfort of the cushion, however, the present economic conditions may demand an alternative strategy.
To a lot of onlookers, the risk and opportunity of sale exist. A sale would bring in the much-needed cash and a new strategic focus, maybe enabling a new owner to move Nissan towards a cleaner, more connected future. Conversely, the brand tradition and its international presence are also strong assets; any purchaser would have to negotiate through a complicated regulatory environment and meet the requirements of the various stakeholders of Nissan.
The remarks of Espinosa also represent a more general trend in the car market. The emergence of technology firms as potential customers, the increased role of the Chinese economy in the auto industry, and the unstoppable pursuit of shared mobility are all coming to a head to establish a situation in which old-fashioned car manufacturers are forced to redefine themselves. In the case of Nissan, determining whether to retain or dispose of the brand will be based on the ability of the company to turn around quickly to fit the needs of the new generation without losing the operational stability required to survive.
It is possible to indicate that any sale would also require a rapid decision, given the fact that the brand is in dire financial condition at the moment. This will be evaluated by investors questioning the value of the company, the extent of the debt, and the viability of its current restructuring processes. In the meantime, employees of Nissan, 20,000 of whom have already lost their jobs, are keeping a close eye on all that happens, hoping that a change of ownership would save the jobs and make people believe in the future of the company.
Espinosa, at least, continues to be a loyal, albeit cautious, guardian, struggling day after day with the titanic task of ensuring that the Nissan icon continues to live in a transformed environment. The fact that he was frank enough to say that anything can happen, on the one hand, emphasizes how uncertain the market is, such that nothing can be ruled out, and on the other, that Nissan is not disqualifying a dramatic exit strategy. It is yet to be seen whether the brand will have a new residence or reinvent itself through a new vision. What is apparent, though, is that the next step that Nissan takes will not only determine the fate of the company but also act as a barometer of how the larger car sector will be able to respond to the current state of rapid technological shock and consumer demands.
Source: Financial Times
