Commentary

Ghosn's Downfall Triggers Concerns About Future Of 3 Automakers

As analysts weighed the cascading impact of Carlos Ghosn’s ouster at Nissan and Mitsubishi following his arrest for allegedly understating his Nissan compensation by roughly $45 million over five years, Renault appointed its No. 2 as temporary CEO but did not fire the 64-year-old empire builder as it weighs the evidence against him. Meanwhile, reports emerged that the real reason for his ouster by Nissan’s board was a merger of Renault and Nissan that Ghosn reportedly had been pushing. 

Ghosn, 64, born of Lebanese parents in Brazil and educated in France, is also a man of many former titles. Until Monday, he was chairman and CEO of France-based Renault, chairman and CEO of Japan-based Nissan and chairman of Mitsubishi Motors. 

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“He was also chairman and CEO of the strategic partnership that oversaw Nissan, Mitsubishi and Renault through the unique cross-shareholding agreement of the Renault–Nissan–Mitsubishi Alliance,” writes Forbes contributor Stephen Pope. “This structure, which includes AvtoVAZ (a Russian motor manufacturer), held approximately 10% of the global automobile market share since 2010. … It makes one of every nine cars sold around the world and together the three companies employ more than 470,000 people in almost 200 countries.”

Combined sales by Renault, Nissan and Mitsubishi Motors rose 6.5% to 10,608,366 units in 2017, the alliance reported in January, and Renault remained, for the third consecutive year, the leader in Europe’s emerging electric-vehicle segment with a market share of 23.8%.  

“There’s an old Mafia trope. Usually a mob boss looks all-powerful, like nothing can stop him and no one can stand up to him. Until he takes things a step too far, and The Commission, AKA the Board of Directors, the other families, whatever, they decide he’s done. And then he gets whacked,” writes Jalopnik’s Michael Ballaban. “A new story from the Financial Times heavily implies that former Renault-Nissan-Mitsubishi Alliance megaboss Carlos Ghosn took things a step too far, and then Nissan’s board decided Ghosn had to go.”

Indeed, “Ghosn’s role has been a source of growing tension as executives at Nissan and Renault look toward the future, including the long-speculated possibility of a full-blown merger. The Wall Street Journal reported in May that executives on both sides were informally exploring such a combination,” write WSJ’s Nick Kostov and Peter Landers. “Nissan’s senior Japanese leadership has strongly opposed the idea. Mr. Ghosn has publicly said a merger isn’t the best option, though people familiar with the matter told the Journal that privately he was more open to a deal.”

Financial Times’ Peter Campbell, Kana Inagaki and Leo Lewis, however, suggest that he was a lot more than an active listener. 

“Ghosn was the driving force behind the merger plans, which met with fierce resistance from Nissan’s board, according to people familiar with the deliberations,” they write. “Renault’s 43% stake in Nissan gives it unusual levels of control, with the ability to appoint senior executives. Nissan’s 15% stake in Renault comes with no voting rights and gives the business no control over its French counterpart.”

Ghosn’s arrest “could trigger a series of crises” for all three automakers, reads the headline above Paul A. Eisenstein’s analysis for CNBC. “Some auto analysts questioned whether the alliance between the three carmakers could survive the affair, leading nervous investors to pare back their holdings. U.S.-traded shares of Renault have slid by about 11% since news of Ghosn’s arrest in Tokyo broke Monday while Nissan’s shares in the U.S. fell by about 6%,” Eisenstein writes.

“You’re witnessing the single greatest act of self-destruction in modern automotive history,” Eric Schiffer, chairman of Los Angeles-based Reputation Management Consultants, tells  Eisenstein. “Not only has [Ghosn] destroyed his life, but he puts those companies in uncharted and dangerous waters.”

The Guardian’s Jasper Jolly reports that Mitsubishi CEO Osamu Masuko suggested there could be a separate chair for the boards of each of the alliance members, saying: “I don’t think there is anyone else on earth like Ghosn who could run Renault, Nissan and Mitsubishi.”

Jolly adds: “Analysts expect a cross-border arm-wrestle for power if the trio no longer share a chair. Hiroto Saikawa, Nissan’s chief executive, has previously expressed his opposition to a full merger between his firm and Renault, and sought to distance himself from Ghosn’s reign after announcing his arrest on Monday.” 

“It’s safe to say [Japan] had never quite seen the likes of Carlos Ghosn,” Brian Bremner writes for Bloomberg Businessweek. “Ghosn was the antithesis of the blue-suited, laconic business leaders who streamed out of Japanese universities during the boom years, valuing consensus-led decision-making, selfless dedication, and, above all else, decorum. He was a flashy, cosmopolitan executive who wore European eyewear and expensive tailored suits and spoke five languages,” he continues. “But,” Bremner concludes, “after his recent arrest for suspected financial crimes, he’s gone from hero to zero.” 

We’ll be watching to see if his former companies’ market shares take a similar trajectory or figure out a way to transcend his domination.

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