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Carlos Ghosn, the creator of the largest car manufacturer in the world, was arrested Monday in Japan. The arrest is a remarkable fall of grace for a man considered one of the most powerful leaders in the auto industry.
Mr. Ghosn (pronounced "Goan") revived the Japanese car manufacturer Nissan and the French car manufacturer Renault, as part of an alliance that has subsequently expanded to include the Japanese Mitsubishi Motors. Last year, the three companies sold 10.6 million cars.
This arrest was a shock for an industry facing the challenges of a global trade war, a shift to electric cars as well as competition from non-traditional automakers.
Why was he arrested?
Nissan internal investigation revealed Ghosn under-reported compensation to Japanese government. Nissan cooperates with prosecutors, who said Ghosn said half of his $ 88 million was paid between 2011 and 2015.
Nissan said the investigation was triggered by a whistleblower who said Ghosn misrepresented his salary and used the company's assets for personal gain.
Greg Kelly, Nissan's first US director and former head of human resources, was also arrested. The two men are believed to have run a long-running scheme to deceive the financial authorities. Neither of the two men has yet been charged.
Why is he still detained?
Prosecutors in Japan can keep a suspect for 72 hours for initial interrogation. On Wednesday, prosecutors asked for an extension of 10 days while they continue their investigation.
The prosecutor's office may request the court to grant further extension of Mr. Ghosn's detention for up to 23 days before deciding whether or not to request an indictment.
If it is established that Mr. Ghosn has violated Japanese financial legislation, he could be sentenced to up to 10 years in prison, fined 10 million yen or both. If it turns out that Nissan has plotted with him, he could be fined up to ¥700 million.
Can Ghosn keep his job?
Japanese companies quickly considered breaking ties. Nissan's board of directors will meet on Thursday to discuss the dismissal of Ghosn from his position as chairman. Mitsubishi has announced its intention to remove Mr. Ghosn from his position as president and conduct his own investigation into his conduct.
Renault has been more careful. He retains Mr. Ghosn as President and Chief Executive Officer, but the Board of Directors has asked Thierry Bolloré, Director of Operations, to assume the day-to-day responsibilities of Mr. Ghosn. Philippe Lagayette, the main independent director of the board, will temporarily assume the role of chairman.
The French government is Renault's largest shareholder. The Minister of Finance and Economy, Bruno Le Mayor, said that France had no evidence of the charges against Mr. Ghosn in Japan. But the unions are already worried about the consequences that this arrest could have on more than 47,000 workers at Renault.
Did not he earn a lot of money?
Yes. But CEOs do it – and Ghosn has a reputation for rewarding good performance and being rewarded for his performance.
After taking over as Nissan's COO in 1999, Ghosn revised the way older employees were paid. Instead of the Japanese tradition of seniority rewards, Mr. Ghosn imposed a performance-based system and awarded bonuses to mid-level managers.
According to the Tokyo prosecutor's office, he is under investigation for concealing tens of millions of dollars in compensation from 2011 to 2015. Prosecutors said he had under-reported his salary of more than 5 billion yen ($ 44.5 million), thereby downplaying his actual earnings. half – in reports to an office of the Ministry of Finance of Japan.
Mr. Ghosn has been involved in several wrangling around his executive's compensation, thus attracting investor and politician sentiment. In 2016, French President Emmanuel Macron, who was then Minister of Finance, lobbied Renault to reduce the compensation paid to Mr Ghosn.
His salary is re-examined the following year and, in 2018, he accepts a pay cut of 30% in exchange for a new four-year term as general manager.
His salary far exceeded that of his Japanese counterparts – he earned four times the salary of the president of Toyota in 2017 – and he was unrepentant.
How did he earn the nickname 'The Cost Killer'?
Mr. Ghosn joined Renault in 1996 as Deputy General Manager in charge of Manufacturing, Purchasing, Research and Development, after 18 years at Michelin, the tire manufacturer. Renault feared a merger with Volvo and Ghosn reduced costs to improve margins and earned him the nickname "The Cost Killer". "It's sexy," he said nickname this year. "There is blood in there, there is wickedness."
In 1999, Renault acquired a significant stake in Nissan and Mr. Ghosn was sent to Japan to take up the position of COO. A few months later, it closed five national factories and cut about 21,000 jobs, or about 14% of the workforce.
Mr. Ghosn was pilloried by the press, but the aggressive cost reduction worked and stabilized Nissan's finances.
He is considered an innovator in the way he eventually developed an arrangement that allowed the two manufacturers to function as a single builder, sharing the cost of developing new models and purchasing components.
He had a lot of titles. He was appointed CEO of Nissan in 2001 and Renault in 2005. In 2016, Nissan acquired a 34% stake in Mitsubishi, which allowed the company to bail out after taking control. falsify fuel economy estimates. Mr. Ghosn brought Mitsubishi into the alliance and received a third salary.
He stepped down as Nissan's chief executive last year, but remained president and continued to lead the alliance.
Would we miss it?
Ghosn planned to merge the Nissan and Renault companies to consolidate the partnership, but faced opposition from both sides, according to news reports. Bloomberg News and the Financial Times.
He was pampered in business circles, perceived as the incarnation of a top-flight multitasking manager while zipping between Paris and Tokyo.
He had houses in Paris, Amsterdam, Beirut and Rio de Janeiro; was a regular panelist at the World Economic Forum in Davos, Switzerland; and celebrated his 2016 wedding in a highly publicized fashion in Versailles with actors dressed in 18th century costumes. His life has even been narrated in manga comics.
But in Japan, it was a rarity: a foreign leader in a national company, which instituted dismissals just as rare and which was largely paid, compared to other Japanese leaders, if not according to international standards.
The charges against Mr. Ghosn could trample on his legacy. An economist from Japan Macro Advisors in Tokyo described his arrest as follows: "Losing Mr. Ghosn from the Japanese business management scene is a loss for Japan. We need a larger number of non-Japanese business leaders, willing to take risks, propose a vision and exert leadership downward. "
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