The turmoil created by Nissan Chairman Carlos Ghosn’s downfall speaks to the executive’s outsize role in holding together the Nissan-Renaut-Mitsubishi house he almost single-handedly built. His departure leaves no obvious person to fill that role.
The shock news of Carlos Ghosn’s arrest in Japan was barely a few hours old when cracks began to appear in the automotive alliance that the globe-trotting executive had skillfully held together for almost two decades.
At a late-evening news conference Monday in Tokyo, Nissan Motor Chief Executive Officer Hiroto Saikawa — a former confidant of Chairman Ghosn — painted a dark picture of an executive with too much power and too little oversight, which he said might have contributed to the alleged financial misconduct. But the CEO also took a swipe at the Renault-Nissan partnership, saying the Japanese market had been undervalued and that some product decisions were biased.
Over in France, where the state owns 15 percent of Renault, officials were quick to demand continuity in a pact that observers have said has long favored the French side.
Ghosn was detained Monday over a suspected breach of Japanese financial laws. Nissan said he underreported his compensation to securities regulators and that it had uncovered “numerous other significant acts of misconduct” by Ghosn, including “personal use of company assets.” The automaker’s board is set to meet Thursday to remove him.
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The turmoil created by Ghosn’s downfall speaks to the executive’s outsize role in holding together a house he almost single-handedly built. As CEO of Renault as well as the chairman of Nissan and new partner Mitsubishi Motors, the 64-year-old was the common denominator and driving force of the partnership originally formed in 1999, when Nissan was near collapse. More than once since then, Ghosn stepped in to appease bickering shareholders, and his departure leaves no obvious person to fill that role.
“This alliance is quite heavily bound up in the personality that is Ghosn,” said Demian Flowers, an analyst at Commerzbank in London. “If you’re talking about driving integration among these companies, and even the hope of a full merger in the future, then I think those hopes just took a big step back. ”
At Nissan’s news conference, Saikawa sought to quell any speculation of an outright rupture, saying Ghosn’s departure wouldn’t impact the alliance, which he called bigger than just one person.
“Since the investments these companies have to make in electric cars and autonomous driving are so big, and since the car industry is changing in ways we don’t fully understand, it’s probably suicidal to break up the alliance,” said Kenneth Courtis, chairman of Starfort Investment Holdings, an investment, private equity and commodity group, and a former Asia vice chairman of Goldman Sachs Group.
It’s hard to underestimate Ghosn’s success in forging the complicated structure. He built his reputation as a turnaround specialist by bringing Nissan back from the brink — the stuff of legend in Japan, where Nissan’s demise had been something of a national tragedy. Its revival, in turn, made Ghosn a hero.
When the alliance fell into crisis after France boosted the state’s stake temporarily to win a shareholder vote in 2015, Ghosn defused the situation by playing the role of chief automotive diplomat between the French and Japanese sides.
But even Ghosn — harnessing the unique cultural approach of his Lebanese-French-Brazilian heritage — never quite managed to overcome the differences between the two main sides. Even the probe into Ghosn’s alleged misconduct reveals the fault lines, with the allegations against Ghosn sparked by a whistleblower investigation at Nissan. Meanwhile, Renault appears to have been kept in the dark.
Part of the lopsided power structure stems from the fact that Nissan has grown into the larger of the two by deliveries and sales, but has less say. Renault owns just over 43 percent of Nissan, compared with the Japanese company’s 15 percent stake in the French partner. It also boasts full voting rights in the alliance, while Nissan has none.
“It is hard not to conclude that there may be a gulf opening up between Renault and Nissan,” said Max Warburton, a London-based analyst with Sanford C. Bernstein.
The upheaval comes at a pivotal time for automakers, which are preparing for the shift to self-driving, electric cars and facing upstarts from Uber Technologies to Waymo that are shaking the industry’s decades-old pillars.
Ghosn was among the first traditional auto bosses to embrace electric vehicles, spearheading the rollout of the Nissan Leaf in 2010 when battery-powered cars were a wildly exotic sight on most roads. He predicted that small companies would have a hard time keeping up, making scale a vital recipe for survival. Salvation for the car industry lay in embracing more than just building automobiles, Ghosn said.
“You’re going to see clusters of carmakers, of tech companies, software companies, align together in order to bring this offer to the market,” the executive said in an interview last month.
There’s no obvious choice to replace Ghosn. While he moved to pass the baton — appointing Saikawa at Nissan last year and flagging Renault Chief Operating Officer Thierry Bollore as a “good candidate” to replace him at the French carmaker — there is limited management structure for the alliance.
“Ghosn always put himself in the position of appearing indispensable,” said Jean-Louis Sempe from Invest Securities.