MOTOR MOUTH
THE TRUTH ABOUT THE CARLOS GHOSN SAGA
It has the makings of a best-selling Ian Fleming novel: a daring escape hidden in a case meant for a double bass, a clandestine flight by private jet — to Istanbul, no less — and then, of course, the requisite warrants issued by Interpol and other conspiratorial agencies.
The renegade is named Carlos Ghosn — a lowly auto executive — and he has made the Nissan-Renault affair the biggest news in the automotive world since Elon Musk’s Twittergate.
But how did we get here? Who is this Ghosn fella? And what the H-E-double-hockeysticks is a buttoned-down CEO doing running from the law? Here’s the real reason Carlos Ghosn’s escapades are truly intriguing.
The first 18 years of the Brazilian-born French (of Lebanese descent, hence his refuge of choice) engineer’s career were boredom incarnate, his tenure as first a plant manager and then a research director at Michelin. It’s the kind of middle-management career that makes headlines in class reunions and nowhere else.
But in 1996, Renault — in yet another round of its seemingly perpetual financial upheaval — hired Ghosn to revamp the troubled automaker from top to bottom. So successful was he that by 1997, thanks to perhaps the most brutal restructuring program in the history of European automaking, Renault was back in the black. And thus, the legend of Carlos Ghosn began. Nicknamed “Le Cost Killer,” Ghosn was courted by virtually everyone in the biz, so ruthlessly efficient was his remake of the troubled French automaker.
Serendipitously, just as he finished Renault’s restructuring, Nissan fell into an even deeper financial abyss. Flush with the cash Ghosn had sweated out of the workers, Renault stepped up and, well, saved Nissan. It was a sweetheart deal for the just recently troubled French automaker; it eventually gained a full 43.4 per cent of Nissan’s (voting) shares in exchange — and this will become very important — for just 15 per cent of Renault (non-voting) shares. Effectively, Renault controlled Nissan.
At the time, the Japanese automaker was US$20 billion in debt. The news of the day was so bleak that CNN Money, BusinessWeek and The Economist all posited that a turnaround was impossible. Ghosn was made chief operating officer of the company, though according to the New York Times, he was advised by John Casesa — then a top auto analyst at Merrill Lynch — to rent a house in Tokyo rather than buy one.
Instead of backing down, Ghosn’s Nissan Revival Plan called for a return to fiscal profitability in less than six months and he personally guaranteed — I was present for some of his more adamant promises — a profit margin of 4.5 per cent within two years. He cut 14 per cent of the workforce, shut five plants, and auctioned off Nissan’s aerospace division. But, instead of becoming a pariah — layoffs and plant shutdowns being anathema to traditional Japanese corporate culture — Ghosn became a (Japanese) national hero.
The rapidity of Nissan’s turnaround — 1999’s loss of US$6.5 billion turned into a profit of US$2.75 billion a year later, and by the end of 2002, Nissan’s gross profit margin was above eight per cent — made him a hero.
He soon headed both Nissan and Renault — the first time one person had led two Fortune 500 companies simultaneously — and committed Nissan to an unprecedented focus on electric vehicles. His success was so admired that there was talk in 2006 — just before the financial crisis that precipitated numerous automotive bankruptcies — of a merger with General Motors.
Eventually, when Mitsubishi hit its own financial headwinds in 2016, there was really only one choice for turnaround artist and Renault-Nissan became the Renault-Nissan-Mitsubishi Alliance, which was the most prolific automaker for much of the year, displacing perpetual front-runners, Toyota, Volkswagen and General Motors. It was also the beginning of the end.
Nissan, now the dominant force in the alliance, was chafing at the managerial dominance the now ailing Renault continued to enjoy. And this is the source of the real intrigue.
Ghosn’s arrest on November 19, 2018, happened to coincide with his new-found desire to blend Nissan and Renault’s operations into a tighter merger. Because of the timing, Ghosn claimed — and still claims to this day — the charges against him were motivated by Nissan insiders rebelling against any further conjoining with their former saviour.
Indeed, though the charges against Ghosn are hardly spurious — receiving payments beyond his scheduled earnings, misuse of company funds, and misappropriation of funds are hardly piffling affairs — they do smack of opportunism. In fact, Ghosn’s defence is that Nissan’s executive board knew all about the expenditures and were turning a blind eye — if not actually approving them — until they provided a convenient excuse to scuttle Ghosn’s merger plan.
It turns out, he may be right. The initial allegations focused on Ghosn and his adviser Greg Kelly, who set up some of the financial machinations involved. Less than 11 months later, one of the prime architects of Ghosn’s ouster — Hirato Saikawa, his successor — was forced to resign for pretty much the same allegation. Saikawa-san, Ghosn notes, was let off comparatively easily, and according to the New York Times, as many as six other senior Nissan directors are guilty of the same malfeasance.
In the meantime, the evidence against Ghosn remains murky at best.
Whatever the case, there are no winners in this scandal.