If all had gone according to plan, Carlos Ghosn would have been winging his way to Amsterdam on his corporate jet Wednesday night en route to a potentially critical meeting of senior members of the Renault-Nissan-Mitsubishi Alliance — of which he has long served as CEO.
Nissan’s headquarters. Following what was described as a “months-long” investigation, which Nissan said was triggered by a whistleblower, Ghosn stands accused of a number of financial irregularities. Chiefly, he’s accused of misusing company funds and underreporting his income at Nissan, where he served as chairman.
Ghosn reportedly failed to report about $82 million in compensation that was deferred until after his retirement, among other things, The Wall Street Journal said Thursday, citing an unnamed person familiar with Nissan’s investigation.
But, as the investigation drags on without formal charges, there are mounting questions about what the case is really about.
Ghosn wouldn’t be the first senior industry executive to face allegations of financial abuses. But barring instances of bribery or other serious crimes, arrests are extremely rare.
If anything, a number of industry executives — as well as some Nissan insiders — are asking whether the Brazilian-born Ghosn has actually become a pawn in an increasingly bitter dispute between France’s Renault and Nissan over control of their global empire, according to interviews with at least a half-dozen people close to Nissan, the alliance or Ghosn himself. They asked not to be named because they still have strong ties to the industry or directly to Nissan.
Ghosn’s abrupt arrest, lack of charges and the timing — just before what was expected to be an important meeting of alliance leaders — has industry executives wondering whether the charges are justified or even real. His immediate dismissal from Nissan and lengthy detention, without being able to address the accusations, has elicited questions across the globe about the lack of due process, with even French officials weighing in.
“It’s a coup,” contended George Peterson, an auto-industry veteran and head of the California-based consulting firm Auto Pacific, Inc.
Peterson said he believes the Japanese side of the nearly 20-year-old alliance wanted to see Ghosn out before he made an anticipated move that would have seen the French side of the alliance formally take over its two Asian allies, both of which have continued to operate as independent companies, despite their close ties to Renault.
Talks of a possible conspiracy within Nissan’s senior ranks have surfaced in news reports on both sides of the Pacific in recent days, and they normally might have been greeted with a laugh. But a number of people close to Nissan are not dismissing the subject outright, the people said. Some, if anything, are taking it quite seriously.
“The timing seems more than coincidental,” suggested one former top auto executive who has high-level ties with Nissan.
Nissan spokeswoman Christina Adamski declined to comment for this story, pointing to the company’s previous statement on Ghosn’s arrest Nov. 19. Nissan accused then-Chairman Ghosn and board member Greg Kelly of conspiring to conceal Ghosn’s full pay from Japanese authorities as well as “numerous other significant acts of misconduct.”
Nissan CEO Hirota Saikawa appointed himself as chairman and also fired Kelly. Mitsubishi Motors also removed Ghosn as chairman of its board. Renault’s chief operating officer, Thierry Bollore, is filling in for Ghosn as CEO on a temporary basis. Both Renault and the alliance have retained Ghosn as chairman and CEO so far.
Ghosn couldn’t be reached for comment, and his U.S.-based attorneys at Paul, Weiss, Rifkind, Wharton and Garrison didn’t respond to requests for comment.
Mitsubishi and Renault didn’t return requests for comment for this story.
Following Ghosn’s ouster at Mitsubishi, CEO Osamu Masuko said the move was “unavoidable,” though it was also “an agonizing decision.” He added that, “The priority was what to do to protect the company, what to do to protect our employees and their families.”
Kelly, who was arrested with Ghosn, has denied any wrongdoing and said Ghosn was paid appropriately. Japanese prosecutors won court approval Friday to detain the two executives for another 10 days.
“It seems pretty harsh when it involves a major corporate executive, who has been credited with saving the company, and another board member. It just seems strange,” Kelly’s attorney Aubrey Harwell said of their treatment.
Ghosn was arrested a little more than two weeks before the alliance’s top officials were due to meet in Amsterdam on Thursday. They were there to discuss a number of key issues that could reshape, perhaps even fracture, a partnership that in 2017 claimed to be the best-selling automotive group in the world, according to the former auto executive with high-level ties with Nissan. The group sold more cars than industry powerhouses Toyota, Volkswagen and General Motors.
Little news came out of the meeting. But Renault, Nissan and Mitsubishi issued a joint statement Thursday saying their three boards “have all — individually and collectively — emphatically reiterated their strong commitment to the Alliance” and remain “fully committed.”
What was originally known as the Renault-Nissan Alliance was formed in 1999 when the French automaker decided to invest $5 billion to keep the foundering Japanese company alive. Ghosn, who had earned a reputation as a miracle worker — and a nickname of “Le Cost-Cutter” for salvaging troubled Renault two years earlier — headed to Japan with an aggressive Nissan turnaround plan. Within three years, the carmaker was in the black and had shed billions of dollars in debt.
Originally appointed chief operating officer, Ghosn was elevated to CEO, a post he subsequently took at Renault while also becoming head of the alliance.
In 2016, the executive moved to expand the empire, acquiring a controlling stake in Mitsubishi, a long-troubled Japanese company that teetered on the edge of bankruptcy after revealing a lengthy scheme to falsify fuel economy numbers. Ghosn appointed himself Mitsubishi chairman while stepping back from day-to-day duties at Nissan. He took the chairman’s title, handing the chief executive role to Saikawa.
Nissan CEO Saikawa
The Japanese executive was once seen as something of a protege of Ghosn’s, but any semblance of collegiality disappeared immediately after the arrest when Saikawa told reporters assembled for a hastily called news conference, “I feel strong anger and disappointment.”
Saikawa hasn’t backed off since then. He told Nissan employees in Japan on Monday that Ghosn had grown too powerful, The Wall Street Journal reported. And he made it clear that he and other senior leaders at Nissan wanted to see some major changes in the relationship with Renault.
“They’ve long bridled over the relationship,” said a former Nissan executive who spent a number of years working close to Ghosn in Japan. “They felt they were being treated like second-class citizens.”
For its initial, $5 billion, investment, the French carmaker took a controlling stake in Nissan and subsequently increased that to 43.4 percent. The Japanese carmaker, in turn, has a 15 percent stake in its ally. Things are even more lopsided than that might suggest. Renault claims the right to appoint board members to Nissan and to name the head of the alliance umbrella organization.
'Not equal partners'
“We’ve been an equal partner based on mutual trust. But at the core, there were parts where we were not equal partners,” Saikawa said three years ago, following changes made to their agreement limiting the French government’s ability to use its double voting rights in Renault. Nissan, referring to the change as “deterrence,” got the right to boost its own holdings in its partner if the agreement was violated.
Recent developments seem to have raised new concerns on the part of the Japanese. “When Ghosn made himself chairman of Mitsubishi, that was seen as a step too far,” said analyst Peterson.
The last straw may have come with renewed discussion of a Nissan takeover.
“I don’t want to say ‘the plot was hatched,'” said Joe Phillippi, head of AutoTrends Consulting, “but things may have changed when Ghosn started talking about putting all three companies together.” That sentiment was echoed by several other people with close ties to Nissan, though none wanted to be quoted by name.
On Monday, a week after Ghosn was hauled off his jet and taken to the Tokyo Detention Centre, Saikawa outlined some of the positions he was intending to stake out. While Japanese media reports suggested the companies’ current equity stakes aren’t in play, the Nissan CEO indicated Monday that he wants to limit, if not eliminate, Renault’s ability to name members to its board. And he reportedly wants a clear role in determining the head of the alliance.
“Nissan sells twice as many cars as Renault and makes a lot more money. They expect to have things reflect that,” said the former Nissan senior global executive who worked with Ghosn.
He said the entire affair seems suspicious. He has had a lot of trouble understanding how, as Nissan claimed it learned in its review, Ghosn could have underreported his income and misused company funds — including the alleged purchase of homes in Rio de Janeiro and Beirut — without someone knowing.
“No way they couldn’t have known,” the former executive said.
If Nissan went looking for a way to get rid of Ghosn, why didn’t the company then simply fire him? There have been at least a few cases within the auto industry in recent years where executives have been accused of being too loose with their expense accounts. Ernst Lieb, the former head of Mercedes-Benz’s American sales subsidiary, was terminated several years ago for just that reason. But he wasn’t turned over to the police.
If Nissan wanted a stronger bargaining chip, however, several observers have been asking why Japanese authorities would play along. They suggested it may reflect a xenophobic mindset, and more than one pointed to the case of Julie Hamp, an American who in 2015 was hired by Akio Toyoda, the CEO of Toyota Motor Co., to be the automaker’s global communications chief. But she was arrested soon after moving to Tokyo, prosecutors alleging she had smuggled drugs into the country.
Like Ghosn, Hamp was held in detention under harsh conditions. Initially, Toyoda — the grandson of the automaker’s founder — stood firmly behind her. It was only after the company backed down and Hamp herself resigned that she was released and sent packing back to the U.S.
“She has already gone through a certain level of punishment,” an official from the Tokyo District Public Prosecutor’s Office told The Wall Street Journal, which noted that prosecutors considered her resignation in deciding to release Hamp without charges.
Is the case against Ghosn based more on politics than justice? Even if he violated Japanese law, the harsh handling of a man who was hailed as a hero 20 years ago for saving a fast-sinking Nissan has raised plenty of disquieting questions.