One of the world’s best-known, most highly respected and successful car company bosses, Carlos Ghosn, has been arrested in Japan and looks certain to be stripped of his role at the Renault-Nissan-Mitsubishi Alliance. How did it happen to him?

By Stephen Corby


Posted on November 20, 2018

Rich, powerful people often have an aura about them, but the air around Carlos Ghosn – who was, until today, one of the most respected and admired minds in the automotive industry – has always vibrated with something slightly more intimidating.

It’s not so much that he always seemed angry as that he possesses a truly furious intellect and a forceful personality, and if you had the temerity to question his opinion on something he would come at you, physically and mentally, and attempt to batter your argument to pieces.

Ghosn had been an intimidating, immensely powerful figure

This was always tremendous fun to watch if you were in a conference room, or at a roundtable, where Ghosn (who created the biggest alliance in the motoring world by combining Renault and Nissan with Mitsubishi) was taking questions from journalists, as long as you weren’t the one asking the question.

Ghosn is fond of locking eyes with his interlocutor and then marching across the room – all 170cm of him – bristling to get right in their face and ram his point home. He does not suffer fools so much as immolate them on the spot, and the impression you were left with was that he believed himself to be the smartest person in the room, because he was.

Which is why his arrest in Tokyo and the revelations about his alleged tax dodging and misuse of company resources have come as such a sledgehammer surprise to almost anyone who’s ever had dealings with him.
Surely Ghosn is too smart, and too rich and powerful, to have (allegedly) stuffed up so heinously?

Surely Ghosn is too smart, and too rich and powerful, to have (allegedly) stuffed up so heinously?

And yet the evidence is damning enough for the Japanese authorities, who have been investigating him for some time, to arrest him and claim that he had been under-reporting his salary by some JPY5 billion (A$61 million).

Ghosn, 64, and another Nissan director, Greg Kelly, have both been accused, in a statement from Nissan itself, of: “reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount.

“[Regarding] Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets.”

Nissan said the alleged violations were discovered as part of a long investigation that was started after a tip-off from an internal whistleblower.

According to Japanese news sources, Ghosn’s latest contract, which he signed earlier this year, and which runs until 2022, featured generous compensation by Japan’s relatively modest standards, and his pay had been an issue over the years. It is alleged that the two men collaborated to underreport Ghosn’s income by about A$61 million over a five-year period ending in March 2015.

Shares in Renault fell 14% when the news broke, but bigger falls are expected after the Japanese markets next open.

An industry superstar

Ghosn has long been seen as a superstar of the industry, and not just for his bold proclamations about the future of electric vehicles and autonomous cars. He is credited with turning Nissan around from a position close to bankruptcy to a booming state, after he was entrusted with the task by Renault in 2001.

He was also the architect of the tie-up between the Renault-Nissan alliance and another Japanese firm, Mitsubishi, which created a giant that, combined, sold 10.61 million cars in 2017, putting it narrowly ahead of VW as the world’s largest car maker.

Famed as both a hard-headed cost cutter and an innovator, Ghosn became hated by the unions in France and yet so popular in Japan that his name turned up on lists of people the Japanese public wanted as their prime minister, despite his obvious lack of eligibility.

To say his dramatic fall – Nissan’s board is almost certain to dismiss him as chairman when it votes on the matter this Thursday – comes as a shock is an almost criminal understatement.

Nissan CEO Hiroto Saikawa spent an excruciating seven minutes bowing and apologising for the company’s failings at the start of his news conference.

“Beyond being sorry I feel great disappointment, frustration, despair, indignation and resentment,” Saikawa said.
“I want to minimise the bewilderment and the impact on the operation and our business partners. This is an act that cannot be tolerated by the company. This is serious misconduct.”

He then outlined the three major misdemeanours that had been uncovered, including under-reporting income, illicit use of company expenses and using investment funds for personal gain.

Did Carlos Ghosn have too much power?

While pledging to beef up corporate governance, the CEO also admitted that the failings may have occurred because too much power was focused on one person.

The picture being painted in the industry within hours is that perhaps Ghosn had become too powerful, and held on to that power for too long, to the point where he felt he could do whatever he pleased and get away with it.
Certainly, Ghosn was an executive who ruled with an iron fist, and the word “tyrant” was occasionally used to describe him, but he was also, in his time, undeniably successful, and a hugely convincing frontman for his brands.

When Ghosn told you that the future would be all about self-driven electric vehicles and that you’d see them on Australian roads soon, you damn near believed him. And then you’d leave the room he was in, walk outside and realise that he exists in an envelope of self-belief so powerful it’s easy to be drawn into it.

Knowing his love of a fight, however, it would not be at all surprising if he mounts a vigorous defence. And he might have one more fantastically fiery press conference left in him yet.

Header image credit: Norsk Elbilforening