Automaker supremo held on suspicion of misusing funds
Second senior executive also arrested
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 under-reporting his income and misusing company funds.
The scandal reverberated across the globe and threw into question Ghosn’s future as leader of the Renault-Nissan-Mitsubishi alliance, which sold 10.6 million cars last year, more than any other manufacturer.
Nissan CEO Hiroto Saikawa said Ghosn was taken into custody after being questioned by prosecutors upon arriving in Japan earlier on Monday. Ghosn is of French, Brazilian and Lebanese background and lives in France and Japan.
Nissan said Ghosn, 64, and another senior executive, Greg Kelly, were accused of offences involving millions of dollars uncovered during a months-long investigation set off by a whistleblower. Kelly was also arrested.
“Beyond being sorry I feel great disappointment, frustration, despair, indignation and resentment,” Saikawa said, apologising for a full seven minutes at the outset of a news conference.
Yokohama-based Nissan Motors is cooperating with prosecutors.
Saikawa said Nissan’s board will vote Thursday on dismissing Ghosn and Kelly, whom he described as the mastermind of the alleged abuses.
“This is an act that cannot be tolerated by the company,” he said. “This is serious misconduct.”
Saikawa said three major types of misconduct were found: Underreporting income to financial authorities, using investment funds for personal gain and illicit use of company expenses.
Because of the continuing investigation, Saikawa could not disclose many details. But he promised to tighten internal controls, saying the problems may have happened because too much power was concentrated in one person.
“We need to really look back at what happened, take it seriously and take fundamental countermeasures,” he said.
Ghosn officially still leads the Renault-Nissan-Mitsubishi alliance as CEO and chairman. But experts said it is unlikely he will be able to stay on there or at Renault, where he is also CEO. Renault said its board will hold an emergency meeting soon.
“The last thing one of the world’s biggest automakers needs is the disruption caused by an investigation into the behaviour of a man who has towered over the global auto sector,” said Michael Hewson, chief market analyst at CMC Markets in London.
The companies in the alliance own parts of each other and share investments in new technologies,
This is an act that cannot be tolerated by the company. This is serious misconduct.
among other things. Renault owns 43 per cent of Nissan, which owns 15 per cent of Renault and 34 per cent of Mitsubishi.
Renault SA stock plunged more than 8 per cent in France. Japanese markets had already closed when the scandal broke.
Ghosn was at Nissan for 19 years and signed a contract this year that would have run through to 2022. His compensation, high by Japanese standards, has been a source of controversy over the years.
According to NHK and the Kyodo News Service, Nissan paid Ghosn nearly 10 billion yen ($140 million) over five years through March 2015, including salary and other income, but he reported receiving only about half that amount.
The allegations are a serious blow at a time when Nissan is still getting over a scandal in which it admitted altering the results of emission and fuel economy tests on vehicles sold in Japan.
Ghosn is credited with resuscitating Nissan from near bankruptcy by cutting thousands of jobs and shutting plants. His triumph made him something of a national hero in a country where foreign CEOs of major Japanese companies are relatively rare.
He also looms large in France, where he had turned Renault around and made it into a global player, notably in electric vehicles. He led the French carmaker through major job cuts and an expensive and contentious bailout, earning the nickname “Le Cost Cutter.”
Ghosn became a nemesis of French unions and left-wing politicians, who saw him as a symbol of capitalism’s excesses, particularly its rich executive pay packages.
Renault shareholders in 2016 voted against Ghosn’s pay package as too generous, but the board ignored the move.
That angered then-President Francois Hollande. Hollande’s socialist government imposed limits on executive pay at state-run companies and tried to do the same in the private sector but backed down amid concerns that would scare away foreign investment.
Ghosn was Nissan’s chief executive from 2001 until last April. He became chief executive of Renault in 2005, leading the two simultaneously. In 2016, he became Mitsubishi Motors’ chairman.
Saikawa said the scandal was a “negative outcome of the long regime of Mr Ghosn.”
Nissan chief executive Hiroto Saikawa