Carlos Ghosn: The fate of the world's largest car alliance hangs in one word: Ghosn



Chris Reiter, Ania Nussbaum and John Lippert

The world's largest automobile alliance is facing the biggest challenge, despite the arrest of its iconic president threatening to speed up the coupling of car makers it created nearly two decades ago.

Nissan Motor Co. announced that she plans to dismiss Carlosa Ghosn as a chair

man just hours after the accusations against him began appearing in Japanese media and Mitsubishi Motors Corp. is about to do the same, will focus on the third partner in the production triumvirate: Renault SA.

The board of directors of the French company, which left Ghosn as CEO after leaving Nissan, will have an extraordinary meeting Tuesday night. The directors will have to decide whether to stand by their leader or to get rid of him to face charges of alleged financial violations themselves.

At stake it is an alliance that has forced Renault into global heavyweight by giving it access to Nissan's manufacturing and development experience. By having Nissan – whose executive director barely occupied his outrage at alleged actions by Ghosn in late Monday's press conference on Monday – Renault would have a better chance of successfully maintaining the contract. Remaining loyal to Ghosn would risk the alienation of Nissan, which has already been dissatisfied with some aspects of company partnerships.

"It's hard not to conclude that there may be a gap between Renault and Nissan," said Max Warburton, an analyst at Sanford C. Bernstein in London.

Ghosn's arrest report was only a few hours old when it began to attract the carmaker's relationship. At a press conference in Tokyo, Nissan chief executive Hiroto Saikawa, a former Ghosn trustee, painted the dark image of the executive body with too much power and too little supervision, which in his view could have contributed to the alleged financial abuse. However, the CEO also looked at the Renault-Nissan partnership and said the Japanese market was undervalued and some product decisions were distorted.

In France, where the state owns 15 percent of Renault, officials quickly demanded continuity in an agreement that observers said it long favored the French side. President Emmanuel Macron said he would remain "extremely alert" with regard to the stability of the Renault-Nissan alliance.

Ghosno's life-free questions weighed on the shares of all three cars. Nissan dropped 6.5 percent in Tokyo on Tuesday, while Renault SA halted 8.4 percent in Paris on Monday from the lowest since January 2015. Reports on the arrest after the trading session in Japan on Monday. Mitsubishi Motors shares fell by as much as 7.8 percent.

"Big step back"

The loss created by Ghosn's fall speaks of the executive role of executive leaders in holding together the house he has almost built himself. As CEO of Renault and Nissan's chairman and new Mitsubishi Motors partner, he was a 64-year-old common denominator and drive for partnership originally formulated in 1999 when Nissan approached. Several times since then, Ghosn has come to reassure shareholders, leaving no obvious person to fill that role.

"This alliance is quite strongly associated with the personality that is Ghosn," said Demian Flowers, an analyst at Commerzbank AG in London. "If you are talking about how to drive integration between these companies and even the hope of full consolidation in the future, then I think these hopes have only taken a big step back."

At Nissan's press conference, Saikawa was trying to suppress all the speculation about a complete rupture when he said Ghosno's departure would not affect an alliance called by more than one person.

"Given that the investments that these companies have to produce in electric cars and under stand-alone driving are so great, and because the automotive industry is changing in a way that we do not fully understand, it is likely that the alliance is suicidal," said Kenneth Courtis, President of Starfort Investment Holdings, Investment, Private Equity and Commodity Group, and Goldman Sachs Group Inc.'s former Vice-President Asia.

Stuff of Legend

It is hard to underestimate Ghosno's success in creating a complicated structure. He built his reputation as a specialist in turn by bringing Nissan back to the border – a legend in Japan, where Nissan's resignation was something of a national tragedy. His revival again made Ghosn a hero.

When the alliance came into crisis after France temporarily increased its stake in 2015 to gain shareholders' votes, Ghosn calmed down the situation by playing the role of chief diplomat between the French and Japanese parties.

But even Ghosn – using a unique cultural approach to her Lebanese-French-Brazilian heritage – has failed to overcome the differences between the two main parties. Even a probe about alleged Ghosn misconduct reveals flawed lines, with charges against Ghosn triggering investigators at Nissan. Meanwhile, Renault seems to remain in the dark.

Part of the structured engine structure stems from the fact that Nissan has grown into a larger one through supply and sales but has fewer. Renault owns just over 43 percent of Nissan, compared to 15 percent of the Japanese company's share of the French partner. It also boasts full voting rights in an alliance, while Nissan has none.

Marchionne, Zetsche

Ghosn is the last of the managers of the larger number of cars to leave. Sergio Marchionne, architect of Fiat Chrysler Automobiles NV, died unexpectedly in July. Ford Motor Co. said last year's automotive outsider Jim Hackett, while Dieter Zetsche surrendered to Mercedes-Benz Daimler AG for more than a decade.

A French national from Brazil, Ghosn was educated in Lebanon and Paris before he spent eighteen years at the Michelin tire manufacturer and went up the ranks to run the North American division. From there he moved to Renault, where from 1996 to 1999 he was Executive Vice President. He was then commissioned to contact Nissan, where he cut the company's purchasing costs, shut down factories, canceled 21,000 jobs and invested back into 22 cars and truck models in three years.

As the alliance gained in combination, Renault-Nissan is compared to Toyota Motor Corp. and Volkswagen AG – as well as Ghosn's reputation. He was regular at the panels of the World Economic Forum in Davos and other international conferences discussing the future of transport and the need to rethink the industry that is facing a massive disruption.

The revolution comes at a key time for automakers who are preparing for the transition to self-propelled, electric cars and headlights from Uber Technologies Inc. to Waymo Alphabet Inc., which shake the old decades of pillars.

An indispensable leader?

Ghosn was among the first traditional car bosses to adopt electric vehicles, and in 2010 they introduced the development of the Nissan Leaf when wildly exotic views were on most roads. He predicted that small companies would be hard to keep pace, making the scale a vital survival recipe. Salvation for the automotive industry consisted in accepting more than just building cars, Ghosn said.

"You will see that the clusters of car manufacturers, technology companies, software companies have united to put this offer on the market," the CEO said in an interview last month.

There is no obvious choice to replace Ghosn at this time. As he moved to the baton, last year he named Saikawa in Nissan and named Thierry Bollore as a "good candidate," who replaced him with a French carmaker – a limited management structure for the alliance.

"Ghosn has always stood in a position that seems to be indispensable," said Jean-Louis Sempe of Invest Securities SA, which deals with Renault from France. His departure "will introduce the question of longevity and evolution of the alliance."


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