Nissan chairman Carlos Ghosn arrested over allegations of financial misconduct
In a stunning fall from grace, one of the world’s best known automotive businessmen, Carlos Ghosn, who is the Chairman of Nissan was arrested in Japan this weekend over allegations of financial misconduct. As a result of the allegations and arrest, the company will make a decision about firing him this week.
His arrest and imminent dismissal from Nissan has sent shockwaves throughout the auto industry as he was instrumental in turning around several major manufacturers and presided over an alliance of the three automakers, Nissan, Mitsubishi and Renault.
The board of Nissan will meet on Thursday to decide what they will do with Ghosn. Mitsubishi also said it would propose that he be dismissed as chairman “promptly”. Renault said its board would meet “shortly”, after Ghosn was detained over allegations including underreporting his income.
There was a hastily organised press conference where the CEO of Nissan, Hiroto Saikawa expressed his “despair”. He also suggested that Ghosn had gained too much power at Nissan and as a result had avoided proper oversight by the company. Saikawa told reporters at Nissan’s headquarters in Yokohama:
The main accusation is that he was underreporting his income and is now being questioned by prosecutors resulting in Nissan’s headquarters being raided. Nissan has said in a statement that it had itself been investigating Ghosn and also Representative Director, Greg Kelly for months after a whistleblower report.
The company had uncovered years of financial misconduct including underreporting of income and inappropriate personal use of company assets. “These two gentlemen are arrested this evening, that’s what I understand,”
Saikawa refused to confirm reports that Ghosn underreported his income by 5 billion yen or around €38.9 million over five years from 2011.
He said an ongoing investigation limited what details could be shared, and refused to be drawn on whether other people were involved, saying only: “These two gentlemen are the masterminds, that is definite”.
Nissan's German-listed securities plunged 12% and Renault shares plummeted by more than 13% in Paris after news of his arrest and as a result, questions have been raised about the alliance of the three car companies, which the Brazil-born executive was often believed to be holding together personally.
From Nissan’s point of view, “the partnership among the three entities will not be affected by this event,” but Saikawa as unable to give details on how Renault and Mitsubishi planned to respond, or who might succeed Ghosn, the ‘Man of charisma’
The French people own a 15% stake in Renault and as a result of the news, French President Emmanuel Macron warned Paris would be “extremely vigilant” about the stability of Renault and the three-firm alliance.
An analyst at TIW, a Tokyo-based research and consulting firm, Satoru Takada said:
“He is the man of charisma for the alliance. It is likely to have a negative impact on its brand image,”
His hard-nosed tactics have even earned him the nickname ‘Le Cost Killer’, in France. Daniel Larrouturou, a senior executive at investment firm Diamant Bleu Gestion added:
“It’s the future of the alliance that seems in play because the thing holding it together seemed to be Ghosn himself,”
Ghosn is one of the best-known figures in the global car industry and obviously. The investigation which has been carried out by Nissan and Ghosn’s subsequent arrest has huge implications. Nissan said in a statement:
"The investigation showed that over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn's compensation,"
Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at Michelin in France, moving on to Renault. He joined Nissan in 1999 after Renault bought a controlling stake and became its CEO in 2001. Ghosn remained in that post till last year.
He is credited with saving Nissan from bankruptcy through measures including closing plants and restructuring, and he has instant name recognition in Japan, where he is a rare high-profile foreign executive.
In 2016, Ghosn also took charge at Mitsubishi after Nissan threw it a lifeline. Nissan bought a one-third stake for about $2.2 billion as it was plagued by a mileage-cheating scandal that decimated sales.
In June, Renault shareholders approved Ghosn's €7.4m compensation for 2017. In addition to this, he received €9.2m in his final year as Nissan chief executive.
The Current CEO at Nissan, Saikawa said that he was still thinking through whether Ghosn was “a charismatic figure or a tyrant” but referring to Ghosn’s success at turning companies around, he said: “looking at the facts he has done what not many other people could have done,”
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