#carlosghosn

Ghosn’s gone? Is such lax security a risk for the 2020 Olympics?

How terrible must Japan’s immigration systems be to allow a man under house arrest to flee to Lebanon? No records at all. Nissan’s former CEO Carlos Ghosn has an instantly recognizable face. He has been in front of the media so many times and is so famous that cartoons have been written about the man who saved Japan’s second largest auto maker from bankruptcy. It is hard to imagine a customs official wouldn’t be able to spot him even with a pseudonym.

FNF Media has questioned Japan’s approach to airport security before. It is woefully inadequate. At Haneda Airport, FNF Media approached Airport Police to question why they allowed passengers to leave baggage unattended in front of an unopened check-in counter. It was met with a shrug of the shoulders.

Japan may be blessed with low crime rates and a population at ease with following instructions, but Ghosn has once again exposed more weaknesses. Don’t forget Japan has a terrible history of terrorism too. We wrote about this here.

One imagines he flew out on a private jet from a regional airport where detection would be far lower. Although entering Japan requires finger prints and a photo, exiting requires a passport and an exit card. Presumably Ghosn flew out on a new passport under a different name and a new exit card.

Lebanon has no extradition rights with Japan. For whatever crimes Ghosn is alleged to have committed, it was clearly worth Y1.5bn ($15m) to escape the Japanese criminal justice system.

As FNF Media has said for many years, the risk of a terrorist event at the ‘omotenashi’ (friendly) 2020 Olympics is higher than many would imagine. They are taking they same approach as did the Germans at the 1972 Munich Olympics. We all know how disastrously that ended. Japan is unprepared. As an investment, the two leading Japanese Olympics security firms, SECOM and Alsok, have nothing but downside risk if anything ensues. Let us pray nothing happens.

Carlos Ghosn speaks out against 忖度

In what is usually the reserve of Hollywood films, Nissan’s Carlos Ghosn has released a video on the basis he was rearrested. He eloquently puts forward his case on why he wants a fair trial. He said he always wanted to preserve the independence of Nissan as a brand despite wanting to move alliance talks forward to a merger but he was backstabbed along the way.

Japan may wish to crow about how it is dedicating itself to best practice corporate governance but the manner in which Ghosn was thrown under the bus certainly raises many red flags. It wasn’t so long ago that the board of Olympus staged a coup against then CEO Michael Woodford when he discovered all of the shady deals and offshore bank accounts. While the updated corporate governance code is a step in the right direction, far too many companies are unwilling to embrace the spirit of it. Filing documents with the exchange are done in ways to say that “we comply”. If you delve into the relationships, one company had an independent director who received 20% of revenue from the board he now sat. So much for conflict of interest.

Nissan’s performance was suffering. Ghosn said that “autonomy” is not a given for the brand. This is where “le cost killer’s” business style clearly rubbed the local management the wrong way. For a man who helped save the company from bankruptcy how quickly they forget his two decades of a turnaround when they feel the company is in a safe enough position to stall for time.  The reputation is in the mud.

忖度 (sontaku) sums up Ghosn’s problems. Several years ago the fanfare of the Corporate Governance Code was thrust into the faces of the international investment community that Japan Inc was changing. After visiting multiple staff inside the Financial Services Agency and the Tokyo Stock Exchange there was absolutely no pulse of proactively to be seen anywhere. Even CM’s slight nudge to get the FSA to tap the shoulder of the TSE to suggest listed corporates provide English language materials to encourage more transparency for foreign investors was met with the response, “it might help if you spoke directly to the Deputy PM & Minister of Finance Taro Aso.” Not a word of a lie. Knowing CM’s task was impossible, they were satisfied to brush it aside with that level of enthusiasm. i.e. we won’t lift a finger until told to do so.

Naomi Osaka edition Nissan GT-R sells out

While Carlos Ghosn maybe wasting away in a Tokyo detention centre, Nissan is not wasting the talents of Naomi Osaka. At a puffy ecomentalist launch of the new Nissan Leaf EV, one of the board director’s asked the then just crowned US Open winner what car she’d like and without hesitation it was the GT-R. Why? “Because it is fast.” So despite breaking every politically correct rule as goes a green car launch, Nissan got religion and sold out 50 Naomi Osaka edition GT-Rs in a heartbeat. It looks like Naomi run #2 reservations can be made in Feb. Capitalism wins again. Surely the margins on Naomi GT-Rs will outstrip any margins made on Naomi Leafs.

Watch Japanese companies fumble over getting her to star in their commercials. You know what? Best to buy a basket of Naomi Osaka stocks on the TSE. CM wrote a piece on stocks and Japanese idols – there is correlation! Smaller caps tend to benefit more. Valuations largely irrelevant.

As CM wrote it is any wonder a financial institution hasn’t made a Naomi ETF?

Carlos Ghosn facing arrest

The Asahi Shimbun says Nissan group President Carlos Ghosn is expected to face arrest by prosecutors for underreporting salary. Noone should be above the law but to think of the number of jobs at Nissan he saved plus the return to record profitability makes CM think the tax man is well ahead on the trade.

The repeated folly of the 外人 boss in Japan

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Several weeks back a foreign private equity firm asked what was CM’s opinion on gaijin (foreign) bosses in Japan. The answer was along the lines that an overwhelming majority end up failing for two main reasons:

1) failure to speak the language/understand the culture to a sufficient level and

2) thinking what has worked overseas will automatically apply in the domestic market.

Carlos Ghosn of Nissan-Renault fame could probably go down as one of the few that got it right. In his case Nissan was out of ideas, options and was prepared to listen to its new masters. Michael Woodford of Olympus fame was the other stand out gaijin CEO whose fate was cut short by a board coup after the Englishman uncovered massive fraud.

Sony under Sir Howard Stringer was different. Sony was not a cash strapped basket case on life support like Nissan was so the internal feudal structures could comfortably survive. The urgency to implement drastic change was not deemed an imperative. Stringer had no real command of culture or language and as such the machine below him functioned more or less as it wished. It is no surprise to see the man under Stringer is now the CEO and one can be sure almost all of the staff hitched their trailers to Hirai.

A chat with one of the Japanese dealers of a European auto marque last week highlighted the problems of gaijin bosses without sufficient cultural cut through. The company is struggling to compete with rivals who are simply leaving it for dust. The OEM has had 4 sales heads in the space of 2 years, For a country that prides itself on long term service, promotions based on tenure and stability, it was not a surprise to see the local staff keep their heads down. Why bother engaging with the new boss on what problems exist. Best stay silent. With any luck he’ll be gone and the next person will arrive and we can restart the game.

Yet these foreign bosses ask, “why don’t the local staff engage?” To the locals it is a simple matter of surviving til the next gaijin boss lands. Many gaijin bosses wonder why the Japanese staff spend a lot of time in glass rooms without them. They’re formulating the group responses which they think the boss wants to hear. Many seek to buy time. It is collective rationing on a life-raft.

The Japanese staff invariably prefer security over risk taking, So there is little incentive to be risk takers, even if some staff are bilingual. It isn’t a criticism but an acknowledgment that they don’t trust gaijin bosses. It isn’t even a reflection on the gaijin boss per se. Culture matters. If a gaijin boss can’t converse in a tongue that shows a commitment to understand cultural norms the likelihood of the message being conveyed (not withstanding another layer of translation) is almost pointless.

Another dealer mentioned that it has had the dealer margins recently slashed in favour of volumetric targets before bigger incentives kick in. While such strategies may excite the hungry salespeople outside Japan, the local sales teams here openly admitted the strategy change has had the opposite impact in terms of motivation. One sales member said, “dame, dame, dame!” (Dame = bad). He said it will more than likely mean that they push for selling cheap, low-end, low-margin product just to eat.

The irony is that if the OEM raised the initial margins for the dealers they would feel a margin of safety which would be seen as a way to sell even more bikes because they like the idea of predictability. The added pressure sedates not seduces. The dealer will likely struggle to the point of bankruptcy before trying radical maneuvers. The problem for the OEM is that reversing the strategy will create even less trust between dealer and OEM because it will highlight the lack of understanding. Gaijin strategies don’t apply.

The CEO of one American auto brand here has been crushing it for almost a decade. A gaijin with a mastery of language, culture and an understanding of the marketplace. In a decade, sales have quintupled and likely go up another 20% this year. Why? The dealer relationships are rock solid. They are treated as family. There is dialogue and communication and there is a shared sense of responsibility. If times get a little tight, the HQ makes accommodations so both end up in a win-win situation. In short – Trust!

The aforementioned European make effectively says that “you better make space for all the new cars coming your way next month” The dealers feel there is no relationship. The OEM seems totally dismissive of dealer issues. No matter how tough the market the OEM has no sense of loyalty to the dealers. That makes them feel uncomfortable about leveraging up or taking risk. They balk at buying too much stock because there is little to no flexibility.

Many gaijin CEOs need to know that when in Rome, do as the Romans do. Yet too many foreign bosses come in with the mentality they can swing the locals to their way of thinking. Usually that learning process occurs after realizing that hiring natives who speak their language doesn’t necessarily buy the skills they thought would help ram home the strategies that have worked in other countries.

While all the efficiency, profitability and success metrics make sense from a shareholders perspective, the local staff want security, longevity and shared accountability. The gaijin bosses that try to force Western norms before addressing the concerns of staff will find that both parties will have less of both desired outcomes.

A wise fund manager once said about Japan – “it isn’t capitalism with warts, but communism with beauty spots!” The sooner gaijin bosses understand that they will benefit from the collective strengths of the land of the rising sun.