Nissan CEO pledges to tighten compliance, takes pay cut over scandal

Kyodo News

Posted at Nov 18 2017 05:36 PM

Nissan Motor Co. Chief Executive Hiroto Saikawa flanked by Chief Competitive Officer Yasuhiro Yamauchi bows at the start of a news conference at the company headquarters in Yokohama, Japan. Toru Hanai, Reuters

YOKOHAMA - The top executive of Nissan Motor Co. pledged Friday to tighten the company's compliance policy to prevent a recurrence of improper vehicle inspections, as he will take pay cuts over the scandal that led to a recall of more than 1 million vehicles in Japan and tarnished its brand image.

Chief Executive Hiroto Saikawa said Nissan will introduce a slew of preventive measures such as retooling inspection line layouts, saying poor awareness of compliance was a major problem behind the misconduct, which may have begun nearly four decades ago.

Saikawa said he has started returning part of his salary and will continue to have his pay docked until the end of March. He added other executives will also take pay cuts but declined to comment on Chairman Carlos Ghosn's remuneration. Saikawa took the helm in April after Ghosn stepped down as CEO to become chairman.

"I deeply apologize for the long-standing uncertified inspections and for betraying public trust. We will make all-out efforts to win back trust," Saikawa said at a press conference at Nissan's headquarters in Yokohama after submitting a report of preventive steps to the government.

"I take this as an opportunity...to cut the bad custom from the past," he said.

On Friday, the Ministry of Land, Infrastructure, Transport and Tourism said it may press criminal charges if it finds Nissan to have deliberately given false testimony to ministry officials to cover up the malpractice.

The automaker could face a fine of up to 200 million yen ($1.7 million). The ministry could also revoke its license to conduct final vehicle checks, effectively stopping it from shipping cars.

Improper car checks at Nissan first came to light on Sept. 18 following inspections by the transport ministry. It was found later that uncertified workers had continued to perform the checks even after the problem surfaced. The company was forced to recall 1.2 million vehicles in the home market.

The inspection only applies to cars for the Japanese market and do not affect cars produced for exports.

Nissan domestic peer Subaru Corp. also said recently it found similar misconduct in final vehicle inspections at its domestic plants, while major Japanese steelmaker Kobe Steel Ltd. admitted in October it falsified data on its products and specifications.

The series of scandals have raised questions about compliance policy and quality control in Japan's manufacturing sector, which has made a foray into overseas markets with quality products.

Nissan said a third-party probe found that management bears heavy responsibility for leaving the situation unattended and not being aware of the inspections by unauthorized personnel, which had become the norm at domestic factories.

The CEO said such inspections had been carried out since 1989 on record, but could go back 10 more years, citing testimonies of former employees.

A shortage of inspectors and reduced respect for the car tests also lay behind the uncertified inspections, the report said.

Saikawa said the problem was also caused by labor shortages at its plants, as it is becoming hard to secure plant workers.

Distance between the workers on the factory floor and management of the plants and the headquarters also made it difficult for management to identify the lapses, the report said.

The automaker also admitted it had responded improperly to the transport ministry's inspections, providing inaccurate reports and uncooperative responses to hide the unauthorized car tests. The company also said uncertified workers were using stamps of authorized staff to sign off on documents.

For preventive measures, Nissan said it will change the inspection line layout to place a security gate to isolate the car tests so that only authorized inspectors can enter the space while final inspectors will be wearing a red cap for clear identification.

The CEO, who chairs the internal control committee, will be regularly reported to about compliance status regarding car inspections in order to get a hold of and directly oversee the shop floors.

Saikawa said it is his responsibility to handle the situation, not Ghosn. The CEO has been regularly reporting to the chairman on the scandal.

"I do not think Ghosn's management directly (had an impact)," he said.