They called him “Le Cost Killer” – the man who made a sinking ship afloat, called Nissan. He is Carlos Ghosn, a Brazilian born corporate legend whose daring execution of creating an alliance between Nissan and Renault made him an icon. This strategic partnership, originally called the Renault-Nissan Alliance, was formed on March 27, 1999 with a whopping 450,000 employees with which the group sold an astonishing 8.3 million cars around the world in 2013, as appeared in many sources. Ghosn’s drastic measures, although criticized, helped him amass 470,000 employees with a report of 10.6 million car sales from 122 factories all over the world, as of 2017. The rationale behind this practically earth-shattering partnership was simple. It increased economies of scale for both the companies, ensured better pricing from suppliers due to larger volumes, as well as sped up the process for both to take over the market through the joint development of key elements of their product – including batteries and engines. Their alliance had reduced cost so much that the companies claimed that they had gained over €200 million per year through sharing the processing elements. In 2010 it was reported that they had amassed over €1.5 billion in synergies.
Guess what? There’s more! During the inception of the partnership, Renault had bought 36.8% of Nissan’s stock. In turn, Nissan promised to buy into Renault which came true in 2001, once the company had completely turned its condition around from near bankruptcy and bought a 15% stake in Renault increasing its stake in Nissan up to 44.4%. If that seems unbelievable then you’ve seen nothing yet. They claimed that in 2017 they sold 1 in 9 cars all over the world with a total of 10,608,366 units; becoming the world’s largest producer of light vehicles by sales.
Whom does the credit for such an astonishing level of success belong to? None other than the Chairman of Nissan, Chairman and CEO of Renault, the Chairman of Mitsubishi and Head of the Alliance which was the world’s biggest automaker in sales in 2017, Carlos Ghosn; whose arrest on November 19, 2018 in Japan has shaken the corporate world to its very core. The claim for the arrest? A falsification of his financial reports and an under-report of his compensation by $44 million between 2010 – 2015 along with a misuse of the funds of Nissan Motors. This man, with his mammoth levelled power, was expected to win bail once his detention had been extended by a Japanese court, after spending a month in prison. That was disenchanted by his re-arrest on December 21, 2018 on completely new allegations of messing around with a private investment loss of $15 million, which he shifted on to Nissan’s account during the financial crisis of 2008. With the scandal taking a new and practically harrowing shape as each day passed, prompted Nissan and Mitsubishi Motors to fire Ghosn as the Chairman. What stands out amidst all of this is how one of the highest earning CEOs in France and one of the most well paid foreign executives in Japan with a total compensation of around $15 million in the year 2017 could fall in scandals. Just last year, he was charged for a report that said his alliance had planned to pay secret bonuses to the executives of the company with the setup of a subsidiary in Netherlands. The irony is that, how the well-known industry cost-cutter couldn’t cut down on his own lavish expenditure and seemed to only want more over his multi-million-dollar salary. This was a man who was admired by many. He brought a company to the top from the brink of bankruptcy, that is no easy feat. He was still greatly admired, though his methods were unconventional and practically terrifying; as he axed people off jobs and closed plants to adopt his “cost killer” ways of doing things. He was admired for shaking up the existing corporate culture, putting women in managerial roles and actively empowering them. He put an end to the payment made to extortionate stockholder gangsters. Managers of Nissan have previously praised his leadership. They said he worked hard, lead his employees in the right path to achieve their defined goals, respected the Japanese culture he had become such an innate part of. Then, came his fall from grace, as allegations of him spending funds of Nissan on family vacations and luxurious homes in Amsterdam, Paris, Rio de Janiero and Beirut came to light. Even if to overlook how immoral his actions were, the disrespect to the Japanese standards and culture can’t be unseen. Never before had the country’s corporate history seen such a horror. Moreover, this is for a man whose earnings were massive by Japanese standards that he was even criticized by the government of France.
It’s clear that he had believed he was invincible, that he would never be caught. What follows now is an uncertainty. As of Christmas 2018, Nissan had failed to find a replacement for the one who seemed to be a figure larger than life. On the day of Ghosn’s arrest, Renault’s shares had ended down 8.4%, which is their lowest since January 2015, while Nissan’s stock had slid by more than 5% the day after his arrest. Considering how things have been, there’s no doubt that Ghosn will not be welcomed with open arms anywhere soon, with such a huge display of mistrust and disrespect. His new year is most likely to be spent in prison with an expectedly dragged trial for such a high profile case. While a third party panel is expected to discuss Ghosn’s replacement as the CEO of Nissan and Deputy CEO of Renault show nothing but respect and understanding to each other, one can only hope that the trust the brand has built with everyone else, does not go astray for one man’s greed.
By Arshae Ahmed
