The fallout from an accounting scandal at Nissan Motor is expected to impact down the company’s supply chain, according to S&P Global reports.
Nissan operates with 2,703 suppliers, according to researchers at Japan-based Teikoku Databank (TDB). The firm’s supply chain is likely to see ramifications from the recent arrest and subsequent removal of Nissan Chairman Carlos Ghosn in Japan last week, reports noted, following weeks of speculation over financial misconduct.
“If Nissan car sales decline, Nissan’s supply chain, including the 2,703 suppliers, will be affected,” concluded TDB in a recent report assessing the possible implications of the arrest and accounting scandal.
“Depending on sales performance, suppliers located in the Nissan plant areas would experience a certain degree of impact,” the report continued. “Middle and small-sized businesses with high reliance on Nissan will be severely hit.”
In addition to its supplier base, Nissan and its affiliates do business with 1,127 car dealerships, which may also take a hit as a result of the accounting scandal. The report highlights the broader implications of corporate financial misconduct on a firm’s partners and supplier base.
In Nissan’s case, that supplier base is comprised of software developers, plant machinery makers, component makers, component accessories, and more. According to reports, nearly half (45 percent) are SMBs with less than $9 million in annual revenue.
“Automakers including Nissan can cancel orders at short notice of less than a month,” an unnamed source from a Nissan supplier told the publication. “They realize their cars are failing sales targets and immediately tell suppliers to stop delivery.”
According to reports, emissions data inaccuracies and quality inspection issues have also plagued Nissan in recent months, making Ghosn’s arrest only the latest in a series of scandals for the company, and in a series of corporate scandals for Japan as a whole.
Earlier this year regional lender Suruga Bank issued an apology in a scandal related to falsified documents in its property investment scheme, while Mitsubishi Materials, Kobe Steel and Toshiba have also been hit by recent scandals.