Inspection scandal crimps chances for top spot

Nissan CEO Hiroto Saikawa and CCO Yasuhiro Yamauchi in Yokohama (c) Bertel Schmitt

A quality inspection scandal that taxes the comprehension of anyone outside of Japan throws a monkey wrench into Carlos Ghosn’s aspirations to make the Renault-Nissan-Mitsubishi Alliance the world’s largest automaker.

At a late-afternoon press conference at Nissan’s headquarters in Yokohama today, Nissan’s CEO Hiroto Saikawa said his company is slowing down its Japanese production lines until its quality inspection teams are fully staffed with trained and certified personnel as required by tough Japanese laws. This will take more than a few months, and it will affect Nissan’s Japanese output until the end of the year, and beyond. At the core of the scandal is the heinous crime that inspections were performed while inspectors were still in training. This would barely warrant a raised eyebrow elsewhere. In rules-obsessed Japan, it is rockking the industry.

Nissan spokespeople refused to quantify the effect beyond stating that Nissan’s six Japanese car factories will slow down their lines to between 40% and 80% of normal capacity.

In Japan, Nissan produces roughly one million cars, or one fifth of its global annual output. While this limits the overall impact on Nissan, it could cost the Alliance the bragging rights of having surpassed the global heavyweights of Toyota and Volkswagen. End of September, the Alliance was 90,000 units ahead of Toyota, but the lead should shrink rapidly under the influence of the scandal.

Nissan stopped all deliveries to the Japanese market for two weeks, and it said this could cost it 60,000 registrations in Japan. Nissan’s October registrations in Japan already were down 43%. Deliveries to Japan resumed on November 7. However, with slowed-down lines, it will be tough to work through the backlog, and it might even get bigger.

Meanwhile, Nissan’s competition is not sleeping. Yesterday, Volkswagen Group reported that its global output rose 8.2% in October. Year-to-date, Volkswagen’s deliveries are up 3.2%. Toyota will report its October numbers by the end of the month, together will all Japanese OEMs.

The race for World’s Largest Automaker has been neck-and-neck for all of the year. With Nissan’s mishap, it might end in a photo finish.