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The fall of Carlos Ghosn caused a shock wave in the global automotive industry.
Last week, he was arrested on suspicion of financial misconduct and was removed from his position as chairman of the Japanese auto giant Nissan.
His detention cast doubt on the future of the Alliance – a global automotive group comprising Renault, Nissan and Mitsubishi.
He also uncovered fractures in the very close relations between Renault and Nissan.
1. The Alliance – three companies acting as a single entity
The Alliance was created in 1999, when Renault saved Nissan from the brink of bankruptcy. The French manufacturer holds 43% of its Japanese partner, while Nissan holds 15% of Renault's capital.
In 2016, Mitsubishi was added to the mix. Damaged by the scandal and struggling financially, it was bailed out by Nissan, which acquired 34% of its shares.
Today, although the three companies maintain distinct identities, they act as a global automotive group. They develop and use common technologies, purchase parts from the same suppliers and develop car building systems from common "modules". Together, they employ more than 450,000 people and sell more than 10 million vehicles a year.
Before this scandal broke out, Carlos Ghosn was president of Nissan and Mitsubishi, as well as president and CEO of Renault. He was and remains President and CEO of the Alliance, which has its own board of directors.
2. Nissan has grown faster than its partner
Although the three Alliance companies already have very close ties, Carlos Ghosn planned to bring them closer, including strengthening the already close ties between Renault and Nissan.
The BBC has understood that even if the merger would not be complete, the two companies having kept their distinct identity, Renault could have taken a majority stake in its partner.
This is thought to have caused Nissan concern and resentment – and looking at the graph below, it's easy to see why. When the partnership between the two was established, they were building cars at a similar pace.
Since then, Renault has almost doubled its production, notably thanks to the acquisition of the Russian manufacturer Avtovaz in 2014.
But Nissan has grown even faster. Today it manufactures almost 6 million cars and vans each year, about a third more than Renault. Last year, it made a profit of $ 5.8 billion and represented a significant part of Renault's own profits.
In this perspective, we could forgive Nissan and its leaders for asking why they risk losing their status and influence within the Alliance, even though they represent the lion's share of production and profits.
3. The Ghosn effect
That said, Carlos Ghosn can rightly claim a lot of credit for Nissan's current strength. When he joined the company in 1999, he was already nicknamed "Cost Killer" in France for his actions at Renault.
He has also been cruel to Nissan, shutting down factories, cutting jobs and changing the way it works. As shown in the graph below, this strategy was effective. Operating profits skyrocketed and remained high until the financial crisis, when, like other automakers, Nissan saw its profits plummet.
Nissan is quickly recovering from the crisis, but since then the road has been more difficult. In recent years, margins have been affected by declining sales, rising costs and the scandal of quality control in Japan. In the six months to the end of October, operating income was down one quarter from a year ago. Had Ghosn already lost his Midas touch?
4. Mr Ghosn was well paid for his efforts
Nissan says Ghosn was systematically under-reporting its revenues to security regulators and misusing the company's assets for personal gain. Prosecutors are investigating these allegations, while Ghosn himself remains in detention.
There are many colorful stories about what he would actually have circulated in the Japanese media, although Mr Ghosn or his lawyers have still not responded.
But one thing we can be sure of is that, under-stated or not, he was making a lot of money. Last year, he touched about $ 17 million in salary, stock options and bonuses.
In fact, his payroll has caused much controversy in the past, but mainly in France, where he was the subject of an annual confrontation with its shareholders. Among the shareholders are the French state, which voted against its last package in June.
5. The actions have fallen behind
The year has not been excellent for investors in Alliance companies. Renault's shares briefly increased earlier this year, initially on reports of a merger with Nissan, then speculation that the French government could sell its stake in the Japanese automaker. But in recent weeks, all three have been in the doldrums.
This is partly related to the state of the market on a global scale. But this may also reflect uncertainty about the future of the Alliance – and the role of Mr. Ghosn in this one – which had come into existence long before the news about Mr. Ghosn was forthcoming. ;bursts.
This news led to a sharp decline in the shares of the three companies. If the future was uncertain before, it is even more so now.
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