After Renault rescued Nissan in 1999, he also became known as the “Keiretsu Killer” for severing the tangle of cross-shareholdings that had almost brought the Japanese firm to its knees.
Carlos Ghosn was dubbed “Le Cost Killer” for his work transforming Renault, a French carmaker. After Renault rescued Nissan in 1999, he also became known as the “Keiretsu Killer” for severing the tangle of cross-shareholdings that had almost brought the Japanese firm to its knees. Nearly two decades later, Mr Ghosn’s creation, an alliance between Renault, Nissan and Mitsubishi, has become the world’s biggest carmaker. But his arrest in Japan has shed light on what a tangled and acrimonious cross-shareholding it, in its turn, has become. The time has come to overhaul it.
No one emerges with any credit from the scandal that has landed Mr Ghosn, one of the world’s highest-flying chief executives, in a poky jail cell in Tokyo. If one thing is clear, it is that his imperious rule, jet-setting life (albeit much of it on company business) and high pay helped bring about his downfall by alienating once-loyal Japanese subalterns.
That is not enough to justify a judicial roughing-up, however. The accusations against Mr Ghosn by an internal Nissan investigation and Tokyo prosecutors remain murky. They range from suggestions that Mr Ghosn under-reported his deferred pay to the stockmarket over a five-year period from 2011, to allegations that he failed to declare his use of a string of corporate properties owned by Nissan. He has not officially commented on the accusations, though he has reportedly denied them.
If true, however, they reflect as badly on Nissan as on him and his fellow detainee, Greg Kelly. Public filings on Mr Ghosn’s pay and perks would have been Nissan’s responsibility as well as his; any shortcomings should have been flagged up by internal as well as external audits. In a country that is at last overcoming decades of resistance to corporate-governance reform, the apparent lack of oversight is a stain on the reputation of Nissan and its board of directors. The more powerful Mr Ghosn became, the more essential the need for close board supervision.
A failure of governance would be bad enough. Worse still would be if Nissan’s executives, as some infer, tipped prosecutors off about Mr Ghosn’s suspected activities in order to stymie a possible takeover by Renault. The French firm’s 43.4% ownership of Nissan, which in turn owns a meagre 15% non-voting stake in Renault (as well as 34% of Mitsubishi), rankles among the top brass in Japan, not least because Nissan makes more cars and fatter profits than Renault. Mr Ghosn had made little secret of his desire to cement the alliance into something permanent, potentially via a merger. The possibility that this would be run by Renault, in which the French state is a 15% shareholder, scares not just Nissan’s executives but the Japanese government too.
The French government bears its own share of the blame for rising tensions within the alliance. Three years ago efforts by Emmanuel Macron, then France’s economy minister, to secure double-voting rights for long-term shareholders, the French state among them, sharpened Nissan’s suspicions that France would stand in the way of any plans to make the alliance more equitable by rebalancing the stakes. Mr Ghosn’s removal offers an opportunity to put things on a proper footing.
The fudge that currently exists, a Netherlands-based joint venture between Renault and Nissan chaired by Mr Ghosn, makes little sense now that the man who held everything together has gone. Although the alliance reported three-way “synergies” of 5.7 billion euros ($6.4 billion) last year, the numbers are vague. Instead, the three companies ought to merge properly. Carmakers need both scale and capital to prepare for the era of electric and autonomous vehicles. A full merger would allow more cost-cutting and sharing of production lines. The need to invest is one reason for GM’s announcement this week that it will cut 14,000 jobs and close seven factories (see ‘GM prepares to close five factories, attracting Donald Trump’s ire’; https://goo.gl/jmmxNv).
The trouble is, the old guard is digging in. Nissan seems to have wrapped itself in the Japanese flag. The French state, suspicious of the circumstances of Mr Ghosn’s removal, is even less likely to cede control than it was before. An alliance that once put a halo on Mr Ghosn’s head has become an unholy mess.