Arrest Of Nissan-Renault CEO Ghosn Means More Automotive Turnover

Carlos Ghosn Credit: Nissan

The news that Carlos Ghosn is likely to be removed from his post as head of Nissan and Renault over “financial misconduct” completes a stunning trifecta of turnover at the top of some of the most important global automotive companies in just the last several months.

Japanese authorities arrested Ghosn in Tokyo on Monday and Nissan said it intended to oust him from his job as CEO after uncovering “significant acts” of financial misconduct, some of which reportedly involved understating of his compensation in securities filings by about $44 million.

The Nissan board was said to be planning a meeting for Thursday where it is expected to oust Ghosn and Greg Kelly, another Nissan executive who was arrested for under-reporting of compensation in securities filings. Nissan said that it had uncovered numerous other financial abuses by Ghosn “such as personal use of company assets.”

Ghosn is chairman of Nissan, CEO of Renault and chairman of Mitsubishi and was the architect of the alliance among the three companies that has become one of the strongest forces in the global automotive industry and a pioneer in vehicle electrification.

There’s been more turnover at the top of auto companies worldwide than in recent memory, including at Volkswagen and at Fiat Chrysler. Herbert Diess was installed as chief of Volkswagen last spring, taking over from Matthias Mueller in muddied circumstances, and Rupert Stadler, boss of the Audi unit of VW, was arrested in the company’s Dieselgate scandale last summer and then fired.

Also over the summer, Sergio Marchionne, CEO and builder of the Fiat Chrysler turnaround, died rather suddenly from complications of surgery after the extent of his health problems apparently was shielded from the board.

Now the turn of events in Japan raises all sorts of questions, including why Ghosn allegedly would commit such abuses when he’s one of the industry’s highest-paid executives. And for Nissan, Mitsubishi and Renault, of course, his ouster would introduce a huge element of instability at a time of wrenching change and slowing sales in the auto business.

Ghosn became Nissan’s chief operating officer in 1999 and CEO in 2001. Last year, he stepped down as Nissan’s CEO but retained the title of chairman. He built the three-company alliance from unlikely origins into a stable force in the industry, surviving the Great Recession of 2008 and also a long period of sluggishness in European auto sales after that. He “balanc[ed] three different companies with demanding elegance,” said Rebecca Lindland, executve analyst at Kelley Blue Book.

But while Ghosn’s legacy is huge, it wasn’t unsullied even before his arrest.

“Ghosn was ahead of the game when it came to automotive consolidation, and he did it in a unique way,” said Michelle Krebs, executive analyst at Autotrader. But he “never achieved his vision for an all-electric world; far from it. He also issued the edict that Nissan would capture 10 percent market share in the U.S. That led to bad and unprofitable behaviors including huge discounting and giant fleet sales that resulted in slumping resale values.

“Nissan also has had its share of quality problems as part of grinding out volume to snag market share.”

Ghosn said he hoped he could cement the alliance so that it would survive his eventual departure. Now, the three companies must test, ahead of schedule, what he built. As Lindland noted, “The alliance will continue without him, but this misconduct will cause disruption and uncertainty at the top for a while.”

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