From Tokyo to Paris – Carlos Ghosn’s downfall ripples

By: | Published: November 21, 2018 3:14 AM

The downfall of Nissan Motor Co chairman Carlos Ghosn reverberated for a second day as politicians and executives scrambled to fill the vacuum at the top of the world’s largest car alliance amid new reports about his alleged financial improprieties.

Renault-Nissan-Mitsubishi,Alliance Ventures,Carlos Ghosn, chairman and CEO of Renault-Nissan-Mitsubishi,VC investmentBack in Japan, where Ghosn has remained in custody since his arrest Monday, more details of his alleged transgressions began trickling out in local media.

The downfall of Nissan Motor Co chairman Carlos Ghosn reverberated for a second day as politicians and executives scrambled to fill the vacuum at the top of the world’s largest car alliance amid new reports about his alleged financial improprieties. Renault’s board is convening for a crisis meeting tonight in Paris to discuss the future of the Renault-Nissan car alliance. While the French government, which owns 15% of Renault, isn’t demanding Ghosn’s formal dismissal, he is no longer in a position to run the automaker, Finance Minister Bruno Le Maire told French radio.

Back in Japan, where Ghosn has remained in custody since his arrest Monday, more details of his alleged transgressions began trickling out in local media. Combined, they painted a picture of an executive who misused company funds to bankroll a lavish lifestyle, from luxury residences across the globe to money funneled into expenses and investment funds. Ghosn hasn’t been seen in public and hasn’t responded to the allegations.

The revelations, which followed a months-long internal probe, put key stakeholders in a bind because there’s no obvious successor. While all sides rushed to assure that the alliance was solid, Ghosn was the linchpin holding the partnership together. The French government, in particular, signaled it will protect Renault, which has benefited hugely from its participation in the French-Japanese pact.

Le Maire said he will meet with management of Renault and state representatives on the board of the company to put in place interim governance. Already on Monday, President Emmanuel Macron said he would remain “extremely vigilant” regarding the stability of the Renault-Nissan alliance. One immediate step will be to fill the post of Renault CEO, which might fall to chief operating officer Thierry Bollore, whom Ghosn himself had previously called a “good candidate” to eventually replace him at the French carmaker.

Le Maire echoed those comments, saying Bollore has “great qualities” that make him capable of stepping in. He said the government will seek evidence from Japanese authorities, after the French side was all but blindsided by the probe and subsequent arrest Monday. The board of Renault and the Macron government were both caught unaware by the allegations, according to people familiar with the matter. A Renault spokeswoman declined to comment on the minister’s plans.

In a memo to employees sent on Monday, Bollore expressed “full support for our chairman and CEO,” calling the alliance an “industrial gem that must be protected and nurtured.” Renault confirmed the content of the letter, which was cited in full by the Financial Times.

While there’s little doubt that Ghosn’s ride atop the global car industry has come to a rapid halt, there’s less clarity on the nature of his transgressions. Japanese broadcaster NHK said Tuesday that Nissan paid “huge sums” toward Ghosn’s residences sprinkled across the globe.

The real estate in Rio de Janeiro, Beirut, Paris and Amsterdam, had “no legitimate business reason” and Ghosn wasn’t paying at least some of the rent, the report said. At a late-night press conference in Tokyo Monday, Nissan Chief Executive Officer Hiroto Saikawa declined to give details on the charges, only saying that had both understated his income and misused company funds, including expenses and investment funds.

All told, Ghosn failed to declare some 5 billion yen ($44 million) in his income on Nissan’s official securities reports submitted over five years starting from 2011, prosecutors in Tokyo said Monday. According to Japanese law, Ghosn can be held in custody for up to 23 days without being charged.

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