The higher you go, the harder you fall. Carlos Ghosn – once the most celebrated CEO in automobile industry’s history for the heroic act of turning around two automobile giants – Nissan Motor Co and Renault SAS from the brink of bankruptcy, is now charged for financial misconduct and other irregularities. So, what does the history say and how does it reflect on future?
Ghosn, a French businessman of Lebanese origin who featured in a popular superhero comic in Japan for being the saviour of Nissan Motor Co, two-decades later has blamed some people inside the Japanese automobile firm for his debacle. Since his first arrest in November 2018, the turn of events have been unfolding several speculations of boardroom politics, conspiracy and power tussle.
Eventually, the man who led the world’s one of the largest and toughest alliances to greater heights is stuck between uncertainty and a trial which is incessantly waiting to begin. Even the latest pre-trial hearing on May 23 in a Japanese court did not give a timeline.
Six months down the line, none of the two major partners of the grand alliance- Nissan or Renault seemed to have gained from it as of today, rather have seen many things falling apart.
Ghosn, probably the only non-Japanese to hold the top position at any of the Japanese firms, smells conspiracy to unseat him.
Some industry insiders also buy his theory sighting many historic events and hinted that he might have been seen as a hindrance on way to Nissan’s influence in the grand alliance. By many, he was considered to be leaning towards French.
He was persistently persuaded by French government to facilitate a merger to enhance their dominance to double voting rights or complete merger.
Some say this brought uneasiness to Nissan and Japanese government which holds minority stake through Government Pension Investment Fund (GPIF).
Interestingly, Hiroto Saikawa, who was appointed as CEO of Nissan in April 2017, on recommendation of Ghosn, complained of Ghosn enjoying too much influence on the company and taking decisions which were not so much in favour of Nissan.
Thus, rejecting Ghosn’s two-decade of successful turnaround of Nissan from bankruptcy with USD 5 billion push by Renault in 1999 which marked the beginning of the alliance. For this Ghosn was applauded across Japan has suddenly turned into a villain.
The relation between Ghosn and Saikawa allegedly soured further as the former was not happy with the performance of the Japanese group, which has seen profits fall on declining margins in the US and slowing growth in China. Some reports suggest that days before his arrest Ghosn was working on final leg of merging Renault and Nissan.
Now both the parties are seemingly stretching apart every time to increase their respective dominance.
Currently, Nissan holds no voting rights, a position that has been the source of tensions with the French company as Renault has a voting right in the former company with 43 per cent stake. Acrimony between the two has exploded since arrest of Ghosn.
The rift came obvious as the company witnessed a mass exodus of top executive form Nissan, especially those who were close aide of Ghosn. At least six top executives of Nissan Motor Co including Arun Bajaj, global head of human resources, Vincent Cobee head of product strategy and Datsun and Roland Krueger, former president of Nissan’s luxury Infiniti brand have resigned.
Toshiyuki Shiga, a former COO also considered very close to Ghosn and a board member announced that he will step down. While on the other hand, in new top level appointments Nissan focused on enhancing Japanese influence even overruling the agreement with the French partner.
Last month Nissan Motor Co elevated Chief Competitive Officer Yasuhiro Yamauchi to chief operating officer, a post that has been vacant since November 2013. His appointment became effective last week.
This is to note that Nissan had an agreement with Renault SA to let an official from its French partner takeover the position of COO or higher and the latter demanded the same but Nissan snubbed it. Rather Nissan named Renault’s representative Christian Vandenhende as vice COO.
Another Japanese national, Senior Vice President, Asako Hoshino was named executive vice presidents. And some other similar changes were made in the last few months.
What’s worrying Nissan is the Renault’s controlling 43 percent voting stake in Nissan, which has no reciprocal rights with 15 percent stake of Nissan in its French partner. Nissan has been trying to reduce that while French carmaker has been thinking otherwise with the French government having largest and most powerful 15 per cent stake.
The trigger for Nissan started at least four years ago, when the news of French Economy Minister Emmanuel Macron pressuring Carlos Ghosn to undertake a full merger with alliance partner Nissan on the government’s terms became public. Since then, this has been emerging and dying. According to a report by Reuters in a report to Macron, Nissan had offered to acquire a bigger Renault stake of about 25-30% to establish better balance.
The French government continued its position of maintaining Renault’s dominant position in the alliance event after arrest of Ghosn. Bruno Le Maire, the economy and finance minister last year told reporters that the French government doesn’t want any change of power between Renault and Nissan.
In 2016, Mitsubishi was added to alliance as it was damaged by scandal and struggling financially; it was effectively bailed out by Nissan, which acquired 34% of its shares.
The reports of Renault trying to merge is rife. Some reports suggested that the Japanese carmaker sought government to safeguard their interest.
The tussle has taken a toll on both the companies but Nissan had a major impact with its domestic sales falling below its target as brand image got hit by a series of scandals including vehicle inspection misconduct.
Its consolidated net profit in the latest year that ended March 31, plunged 57 percent from the previous year. It is further anticipated to go down. Following this, Renault new Chairman Jean-Dominique Senard advised Nissan to focus on recovery.
However, it is to note that over the years Nissan had grown faster in major markets like US, Middle East, China, Europe while Renault could not get that strong presence outside Europe.
Renault Nissan Alliance- Top 10 Alliance market
* For Spain Market, the figures were available only for 2017.
** For United Kingdom, the figures were available only for 2018.
Experts and insiders believe that it is going to be very difficult to run the alliance without Ghosn. “The first you have to see that it will be almost impossible to have a common chairman across three top partners. While the ownership dominance tussle is increasing every passing time and that is reflected on the performance,” said a company executive on condition of anonymity.
Top 10 Groupe Renault Markets
* For China market, the figures were available only for CY2018.India impact
Though, there are not major change seen in the Indian market post Carlos Ghosn arrest but in the long run this may have some trickling impact.
In Asia, after China, Carlos Ghosn had a strong belief in Indian market, thus chose this as venue to make global relaunch of Datsun brand. The revival of Datsun brand was mainly his vision especially for emerging markets like India.
During that time he sent his close associate Guillaume Sicard to build India story for Nissan. However, not much could happen as their market share remains below 1.5 per cent.
“The Indian market has not been able to give much of return as not only the domestic market but also the exports performance has been dented. This may lead to the people in Japan re-think on commitment and support to market like India,” an industry experts told ETAuto on condition on anonymity.