Nissan CEO Carlos Ghosn told shareholders last Wednesday that the Japanese automaker will forego the board members bonus pay to take responsibility for poor performance. The executive said that the bonuses were withheld after the group net profit dropped for the first time in seven years for the fiscal year that ended March 30.
The decision of the Japanese automaker marked the first time it has failed to pay bonuses to its board since Ghosn assumed the top job in 2000. The executive acknowledged at a hall crowded with hundreds of shareholders in Yokohama, south of Tokyo, that the automaker had not met its targets for fiscal 2006. "We are taking our responsibility seriously," he said.
Ghosn tried to assure shareholders by saying that Nissan was investing aggressively in the future, including building brand image, opening plants in emerging markets, launching new product lines and developing green technology. "2007 will be a better year for Nissan," he said.
The Tokyo-based automaker had etched a dramatic turnaround from near bankruptcy under the Ghosn management. The executive was sent in 1999 to negotiate alliance with French partner Renault SA, which owns 44 percent of the company. Ghosn became remarkably famous for saving the near-bankrupt automaker. But recently its sales have been dropping, and it has fell into third place in Japan behind the Toyota Motor Corp. and the Honda Motor Co.
At the annual meeting, most shareholders were calmly attentive but a few assertively throw questions to Ghosn, even mocking him from the floor at times. Such atmosphere is not particularly strange at Japanese shareholders' meetings. Grilled with queries about whether the Japanese automaker was falling behind in quality and ecological technology, Ghosn told shareholders that he was confident that better times were ahead, and that the problems were temporary.
One shareholder demanded the resignation of Ghosn for failing to meet his own "commitments." Other shareholders said that the Japanese automaker had fallen behind in quality surveys, did not have stylish cars like Honda, and needed a better emblem design.
The pivotal part of Ghosn's revival program at Nissan was to have the automaker at all levels from top management to the line worker set performance targets and then try to meet them. Ghosn has constantly met or outpaced his own targets until lately. He told shareholders that Nissan has announced that it needs an extra year to meet its much publicized annual global sales target of 4.2 million vehicles, initially set for the fiscal year ending March 2009.
Japan's third largest automaker has experienced wavering sales in crucial markets at a time when offerings from the Toyota Motor Corp. and the Honda Motor Co. are deemed hot sellers. Soaring raw material costs, incentives, discounts to lure auto shoppers, and lack of new models hurt Nissan's performance.
Ghosn acknowledged Nissan's finances had been so dire in the 1990s that it was not able to invest in technology. Today, Nissan is investing heavily to play catch-up in key technologies, including hybrids powered by gas engines and electric motors to deliver good mileage, as well as other kinds of environmental innovations, he said. The automaker is also working on the enhancement of its auto parts which can be reflected in the .
For the just-ended fiscal year, Nissan's profit dropped eleven percent to $3.9 billion. Additionally, the company sold 3.48 million vehicles worldwide, down 2.4 percent from 2006. Ghosn said that their efforts were under way to revive its business, including trimming jobs in Japan and the U.S., revamping dealerships and planning more product launches.
Nissan expects profit will increase more than four percent to $4 billion in the fiscal year through March 2008.
