Nissan chairman arrested and the fallout could be huge

Kenny Grant
November 20, 2018

Nissan Chairman Carlos Ghosn, who became one of the auto industry's most powerful executives by engineering a turnaround at the Japanese manufacturer, was arrested Monday and will be fired for allegedly underreporting his income and misusing company funds, the automaker said.

Nissan said an internal investigation, triggered by a tip-off from a whistleblower, revealed Mr Ghosn engaged in wrongdoing including personal use of company money and under-reporting for years how much he was earning.

Local media say that Ghosn is accused of not reporting around $44 million (5 billion yen) of income in the course of 5 years, along with other violations of Japan's financial laws.

At a press conference on Monday, Nissan CEO Hiroto Saikawa said Kelly "continuously acted as a close aide of Ghosn" and "controlled the company" backed by the chairman's authority.

Director Greg Kelly was also found to have under-reported his compensation and had "deep involvement" in Ghosn's schemes, according to the company. A Brazilian-French citizen of Lebanese descent who has been with Nissan since 1999, Mr Ghosn heads the world's largest automaker alliance. "The question is, Who will run this leviathan, which he calls the Renault-Nissan Alliance, after the 60-year-old retires, or if, God forbid, something happens to him?" In addition to this, he received €9.2 million ($14.4 million) in his final year as Nissan chief executive.

In his 40 years in the auto industry, the praise Ghosn has won for turning around businesses has regularly been matched by criticism over the amount he has been paid to do it. 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.

Japanese prosecutors also said they had already raided Nissan's Yokohama headquarters, near Tokyo, as part of their investigation.

"This is an act that can not be tolerated by the company", he said during a news briefing.

Hiroto Saikawa

Japanese broadcaster NHK said Ghosn had been arrested on suspicion of financial misconduct. Also, the official will be removed from his positions as chairman.

Last autumn, Ghosn unveiled new five-year strategic plans for both the alliance and Renault Group, and this spring announced the creation of new cross company teams to improve synergies in the areas of engineering, manufacturing and purchasing, among others.

He is widely credited with having saved Nissan from near-bankruptcy.

As well as his role with Nissan, Ghosn is the chairman of the Renault-Nissan-Mitsubishi Alliance, which encompasses ten brands and is one of the world's three largest vehicle groups.

French President Emmanuel Macron warned Paris would be "extremely vigilant" about the stability of Renault and the three-firm alliance after Ghosn's arrest. Indeed, he's been CEO of Renault since 2005, and led that company along with Nissan, where he served as CEO from 2001 until April 2017.

Monday's news marks a stunning downfall for an executive long-regarded as the man who saved Nissan almost 20 years ago. Ghosn is also CEO and chairman of Renault, and he is chairman of Mitsubishi.

With the arrest, Mr Ghosn's role as chief executive of the Renault-Nissan-Mitsubishi Alliance hangs in the balance.

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