Bumpy ride:
Ghosn faces dismissal from three big motor corporations
The arrest of Carlos Ghosn – chairman of the world’s biggest car alliance between Renault SA, Nissan Motor Co and Mitsubishi Motors Corp – is threatening to upend the union of automakers he forged almost two decades ago.
PARIS: The world’s biggest car alliance is facing its biggest challenge yet, with the arrest of its iconic chairman threatening to upend the union of automakers he forged almost two decades ago.
With Nissan Motor Co announcing plans to dismiss Carlos Ghosn as chairman just hours after allegations against him started to emerge in Japanese media, and Mitsubishi Motors Corp set to do the same, the focus shifts to the third partner in the carmaking triumvirate: Renault SA.
The board of the French company, which retained Ghosn as chief executive officer after he left that role at Nissan, is set to hold an emergency meeting Tuesday evening. The directors will have to decide whether to stand by their leader, or whether to cut him loose to face the accusations of alleged financial violations on his own.
At stake is an alliance that has vaulted Renault into a global heavyweight by giving it access to Nissan’s manufacturing and development expertise. By siding with Nissan – whose CEO barely contained his outrage at Ghosn’s alleged actions in a late-night press conference Monday – Renault would have a better chance of maintaining the pact successfully. Staying loyal to Ghosn would run the risk of alienating Nissan, already displeased with some aspects of the companies’ partnership.
“It is hard not to conclude that there may be a gulf opening up between Renault and Nissan,” said Max Warburton, an analyst with Sanford C. Bernstein in London.
The news of Ghosn’s arrest was just hours old when it began to add strain to the carmakers’ relation- ship. At his press conference in Tokyo, Nissan CEO Hiroto Saikawa – a former Ghosn confidant – painted a dark picture of an executive with too much power and too little oversight, which he said might have contributed to the alleged financial misconduct. 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.
Over in France, where the state owns 15% of Renault, officials were quick to demand continuity in a pact that observers have said has long favoured the French side. President Emmanuel Macron said he would remain “extremely vigilant” regarding the stability of the Renault-Nissan alliance.
Questions about life without Ghosn weighed on the shares of all three automakers. Nissan dropped 6.5% in Tokyo yesterday while Renault SA ended Paris trading Monday down 8.4% to the lowest since January 2015. The news of the arrest hit after the close of trading in Japan Monday. Shares of Mitsubishi Motors fell as much as 7.8%.
The turmoil created by Ghosn’s downfall speaks to the executive’s outsize role in holding together a house he almost single-handedly built. As CEO of Renault as well as the chairman of Nissan and new partner Mitsubishi Motors, the 64-year-old was the common denominator and driving force of the partnership originally formed in 1999, when Nissan was near collapse. More than once since then, Ghosn stepped in to appease bicker- ing shareholders, and his departure leaves no obvious person to fill that role.
“This alliance is quite heavily bound up in the personality that is Ghosn,” said Demian Flowers, an analyst at Commerzbank AG in London.
“If you’re talking about driving integration among these companies, and even the hope of a full merger in the future, then I think those hopes just took a big step back. ”
At Nissan’s press conference, Saikawa sought to quell any speculation of an outright rupture, saying Ghosn’s departure wouldn’t impact the alliance, which he called bigger than just one person.
“Since the investments these companies have to make in electric cars and autonomous driving are so big, and since the car industry is changing in ways we don’t fully understand, it’s probably suicidal to break up the alliance,” said Kenneth Courtis, chairman of Starfort Investment Holdings and a former Asia vice-chairman of Goldman Sachs Group Inc.
It’s hard to underestimate Ghosn’s success in forging the complicated structure. He built his reputation as a turnaround specialist by bringing Nissan back from the brink – the stuff of legend in Japan, where Nissan’s demise had been something of a national tragedy. Its revival, in turn, made Ghosn a hero.
When the alliance fell into crisis after France boosted the state’s stake temporarily to win a shareholder vote in 2015, Ghosn defused the situation by playing the role of chief automotive diplomat between the French and Japanese sides.