Innocent till proven guilty. All the newspapers and television shows are saying the same thing. Mainly because it’s so hard to think of a man that was making over $10 million a year stooping so low. A man that saved Nissan Motor Co., a man that had such a cult following in Japan that they created a comic book hero for him.
Who benefits when Nissan-Renault’s Carlos Ghosn is arrested at a Tokyo Airport?
Listen as John Batchelor and Lou Ann Hammond talk about the arrest and aftermath of Carlos Ghosn
The Japanese newspaper Nikkei is reporting that “Carlos Ghosn (64): was arrested for alleged violation of the Financial Instruments and Exchange Act (a false description of the securities report) on behalf of the underwriting of compensation.”
Is this Carlos Ghosn thinking he is above the laws or is there a possibility of a mafia-style operation as Carlos Ghosn appeared to some as an obstacle to a radical reshuffle of the Renault SA, Nissan Motor Co., Mitsubishi Motor Co. alliance? The facts and proof of wrongdoing are currently not available but make no mistake, this is an extremely political battle. Is this a conspiracy to overthrow Ghosn, or covert action on Ghosn’s part because he had to take a pay reduction in salary?
Is Ghosn so arrogant that making 88 million wasn’t good enough? That having all his expenses covered – where he lived, what he drove, how he traveled, that all his cars are free wasn’t good enough? Did he try to dodge taxes on $22 million over a five-year period?
Japan’s Kyodo News service reported that Ghosn and Greg Kelly under-reported their income by a combined 5 billion yen ($44 million) from 2011-2015. Financial Times is more circumspect, “The circumstances surrounding the impending removal of one of the global car industry’s most powerful figures remain opaque. On Tuesday the Financial Times reported that Mr. Ghosn had been planning a merger between Renault and Nissan, but that the Japanese carmaker’s board was opposed to the deal.”
“Le Cost Killer” – A conspiracy theory
As much of a cult following Ghosn has had, he has had detractors.
Carlos Ghosn is the:
Chairman and Chief Executive Officer of Renault SA
Chairman of Nissan Motor Co., which holds a 43.4 percent stake ownership by Renault SA
Chairman of the Board at Mitsubishi Motors, a partner of Renault SA/Nissan Motor Co.
Hiroto Saikawa was co-CEO for Nissan Motor Co. starting in December 2016 and is sole CEO since April 2017
After working at Michelin, Ghosn was swiped away by Renault in 1996 to oversee the South American division. Le Cost Killer became his nickname inside Renault SA after he restructured the company to profitability.
Ghosn set his sights on Nissan in 1999, with Renault SA purchasing a 43.4% stake in the Japanese company that was near bankruptcy. He cut 20,000 jobs at the automaker, 12,000 of those in Japan.
In 2005, Ghosn went toe-to-toe with the French Unions after the much-lauded painful cuts made at Nissan Motor Co.
Just last year, the French government which holds a 15 percent stake in Renault questioned Ghosn’s $9 million salary. Is this under-recording by Ghosn and Greg Kelly, a director who was also arrested Monday, a way to hedge the amount of salary they had received against a country that didn’t like paying exorbitant salaries to CEOs? Was it Ghosn’s way of making up for the pay cut in he had agreed to in return for another four-year term as CEO of Renault SA. Ghosn’s Nissan salary was reduced by 33 percent in 2017 as well.
Ghosn is the CEO of a trifecta that has created a French-Japanese strategic partnership between automobile manufacturers Renault SA, based in Paris, France, Nissan Motor Co., based in Yokohama, Japan. The global auto alliance company was broadened in 2016 to include Mitsubishi Motors, based in Tokyo, Japan, accounts for 10.6 million cars sold annually. The global auto alliance is set to sell more cars than Toyota or Volkswagen globally this year. Ghosn’s biggest mistake was building Nissan into a global profit house and not taking Renault with it. Nissan has the global profit, Renault has the localized French and stockholder power. Nissan has the money to buy Renault, but Renault owns the stock and won’t let it happen. Until now…
The average person doesn’t realize how big the alliance is globally, or how Ghosn has strategically saved each company. Starting in 2008 Ghosn passionately took the charge to create electric cars and recently announced that the Renault-Nissan-Mitsubishi alliance was committed to producing 12 new electric vehicles within five years.
If worse comes to worst
The Nikkei reported that Nissan Corporation established a Dutch subsidiary for the purpose of venture capital investments; at Kelly’s direction, the subsidiary purchased luxury residential properties in Rio de Janeiro and Beirut (Ghosn’s hometowns), which Ghosn was allowed to use at no cost.
According to Japanese News source, Kyodo News the under-reporting by Ghosn violated the country’s Financial Instruments and Exchange Act, which could result in either up to 10 years in prison, a fine of up to 10 million yen ($90,000) or both.
Currently, Ghosn is in jail in and can be held for twenty-three days without being charged with any crime. Ghosn holds citizenship in both Brazil and France, but not Lebanon. Lebanon does not allow extradition to Japan, Brazil and Japan have a treaty, so extradition is possible, but unlikely since Brazil doesn’t extradite even with a treaty. France does not extradite its own citizens, so if he can get back to France, he will not live in jail.
Will Nissan and Renault make the best deal they can to keep Ghosn out of jail as they hammer out a possible scenario to unravel the merger that saved all of them? Only time will tell.
Nissan Motor Co. press release from Yokohama, Japan
Based on a whistleblower report, Nissan Motor Co., Ltd. (Nissan) has been conducting an internal investigation over the past several months regarding misconduct involving the company’s Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly.
The investigation showed that over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, to reduce the sum disclosed of Carlos Ghosn’s compensation.
Also, in regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.
Nissan has been providing information to the Japanese Public Prosecutors Office and has been fully cooperating with their investigation. We will continue to do so.
As the misconduct uncovered through our internal investigation constitutes clear violations of the duty of care as directors, Nissan’s Chief Executive Officer Hiroto Saikawa will propose to the Nissan Board of Directors to promptly remove Ghosn from his positions as Chairman and Representative Director. Saikawa will also recommend the removal of Greg Kelly from his position as Representative Director.
Nissan deeply apologizes for causing great concern to our shareholders and stakeholders. We will continue our work to identify our governance and compliance issues and to take appropriate measures.