Nissan fully pays supplier contracts as Japan regulators swoop

TOKYO – Under fire from Japanese regulators, Nissan Motor Co. has agreed to better honor supplier contracts, retrain executives and review compliance after the Japan Fair Trade Commission rapped the automaker for shortchanging parts makers some $20 million over several years.

The Japanese antitrust watchdog issued its warning against Nissan on March 7, saying the country’s No. 3 automaker underpaid 36 subcontractors ¥3.02 billion ($20.4 million).

The withholdings stretched from January 2021 through April 2023, the commission said.

Nissan, which has hustled to slash $2 billion in fixed costs under its midterm revival plan, has made cost containment a key pillar of its strategy.

That business plan, announced in May 2020, is set to conclude March 31, the end of the fiscal year.

Despite aggressive cost cutting, however, Nissan is still expected to fall short on key goals.

When he unveiled the plan, CEO Makoto Uchida targeted operating profit margin of 5 percent and global sales of 5.4 million vehicles at the finish line. Nissan's operating margin for this fiscal year is forecast at 4.8 percent, while its worldwide volume is seen at only 3.7 million.

Uchida is expected to announce a new midterm plan by the end of the month.

Nissan, maker of the Ariya electric crossover, said it took the commission’s remedies “very seriously.”

Nissan said it has already refunded the full shortfalls to affected suppliers. The commission said that happened Jan. 31. Going forward, Nissan said it will improve compliance, supervision and training to make sure contracts are honored.

“To properly carry out transactions with suppliers going forward, Nissan will strengthen its compliance system by reinforcing the periodical inspections system on compliance of the Subcontract Act, providing thorough and periodic training to executives and employees involved in subcontracting transactions, and taking other measures to prevent recurrence,” Nissan said.

Japanese media had earlier reported that Nissan’s shortfall was the biggest in such contract payments since 1956, when Japan’s subcontractor law was implemented.

Under that law, it is illegal to unilaterally withhold payment to subcontractors after amounts are agreed to, unless there are justifiable grounds such as defective work or breach of contract.

The commission noted in its public recommendation issuance that similar violations have occurred elsewhere in the automotive industry in recent years, without giving details.

Nissan, known among suppliers for its often assertive and contentious approach to negotiations, has been especially focused on cost control in recent years since the arrest and ouster of former Chairman Carlos Ghosn threw the automaker into a tailspin.

But Nissan’s tradition of belt-tightening stretches back as far as 1999, when Ghosn first landed at Nissan, then on the brink of bankruptcy, and began blowing up its bloated supply chain.

Subcontractors affected by the scheme included tire and wheel makers, Japanese media said. They were afraid to complain for fear of losing Nissan’s business, the reports said.

One supplier was shortchanged $6.7 million, according to the Jiji Press.

Over the past decade, Nissan has consistently ranked near the bottom of the U.S. industry in relations with suppliers, according to the closely watched Supplier Working Relations Index published annually by Plante Moran.

In 2023, it overtook Ford for the first time since 2014. But it still trailed Toyota, Honda and General Motors and ranked in the “poor-very poor” category.

Nissan’s score bottomed out in 2018 and has increased annually since 2020.