By Sean McLain in Tokyo, William Boston in Berlin and Nick Kostov in Paris 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 20, 2018).

Japanese prosecutors jailed Carlos Ghosn, an auto industry titan and one of the world's best-known business executives, accusing him of underreporting his pay -- and setting off a leadership crisis at the globe-spanning auto alliance he forged.

Nissan Motor Co., where Mr. Ghosn serves as chairman, said Monday that it went to the authorities with details of an internal probe that alleged he incorrectly reported his compensation in filings over many years. The Japanese auto maker also said it would seek to oust Mr. Ghosn from his position.

Almost two decades ago, Mr. Ghosn was handed the job of creating what would become an unusually deep industrial partnership between France's Renault SA and Japan's Nissan, which at the time was struggling financially. He later added Mitsubishi Motor Co., also of Japan, turning three relatively small players into a colossus that now makes more cars than any other manufacturer besides Volkswagen AG. Amid recent strains between partners and a fast-changing auto industry, Mr. Ghosn was the glue keeping the alliance together.

The arrest also threatens one of the most-storied reputations in the modern auto industry. From Detroit to Tokyo, the 64-year-old businessman has won admirers -- and critics -- for the sometimes-deep cost cutting and layoffs he pushed at the automotive operations he led.

In France, he earned the nickname "le cost killer." A comic book about his life was popular in Japan. In recent years, though, Mr. Ghosn has faced criticism for his lack of succession planning and for his high remuneration. In Japan, his legacy more recently has been dented by quality-control issues.

Nissan said in a statement that the Yokohama-based company had uncovered "significant acts" of financial misconduct by Mr. Ghosn.

Nissan said the probe started with a whistleblower and said it shared details of its investigation with authorities. Nissan Chief Executive Hiroto Saikawa said in an emotional news conference late Monday that the company had found Mr. Ghosn arranged to have his compensation figures underreported in stock-exchange filings. Nissan also said Mr. Ghosn improperly filed expenses and used company assets for his private use. The alleged improprieties occurred over many years, said Mr. Saikawa, who was co-CEO at Nissan before Mr. Ghosn relinquished the shared role in 2017.

Prosecutors confirmed they were holding Mr. Ghosn on allegations he understated his compensation in corporate securities filings. He hasn't been formally charged.

Mr. Ghosn and a fellow Nissan executive arrested in connection with the case, Greg Kelly, couldn't be reached for comment. Mr. Kelly, who is a U.S. citizen, is a trained lawyer and longtime confidant of Mr. Ghosn. Representatives and family members also weren't available to comment.

Mr. Ghosn is also chairman of Mitsubishi, which said it would seek his ouster.

A statement from Tokyo prosecutors said that in the five fiscal years ending March 2015, Mr. Ghosn received compensation of nearly Yen10 billion ($89 million) but that Nissan reported about half that amount in filings to the Tokyo Stock Exchange. Prosecutors said he was under suspicion of violating a Japanese law that prohibits false financial filings.

Last year, Mr. Ghosn earned a total of Yen962 million in cash and stock for his positions at Nissan and Mitsubishi, according to the companies' securities reports. Renault paid Mr. Ghosn EUR7.4 million ($8.4 million) in cash and stock last year, according to the French car maker's securities report.

Until prosecutors or Nissan discloses more detail, it isn't known how Mr. Ghosn allegedly received the unreported compensation. And if the allegations turn out to be true, there is the question of why he would have wanted to understate his pay and why other executives or accountants at Nissan didn't discover the discrepancy before the company filed with the stock exchange.

A former close ally of Mr. Ghosn, Mr. Saikawa expressed shock, at times struggling for words during Monday's news conference. "Beyond being sorry -- I don't know how to say this -- I feel strong anger and despair, " he said. At the same time, comments by Mr. Saikawa, a Nissan employee since 1977, underscored more recent misgivings about Mr. Ghosn's leadership. He outlined a broad critique of Mr. Ghosn's time at the helm and rejected the view that Mr. Ghosn deserved the main credit for Nissan's recovery from near-bankruptcy in the late 1990s.

Information about the investigation into Mr. Ghosn was closely held, Mr. Saikawa said. Other top executives were informed about the allegations Monday afternoon Tokyo time, he said, just hours before Nissan released the information publicly. Renault was also notified Monday, he said.

In a statement, representatives of Renault's board said they were awaiting "precise information" from Mr. Ghosn and planned to meet soon. They also committed the board to "the defense of Renault's interest in the alliance."

The French government owns a large stake in Renault, where Mr. Ghosn, who holds French citizenship, serves as chairman and chief executive. President Emmanuel Macron of France said he didn't have further details but that the country would remain "extremely vigilant regarding the stability of the alliance."

Renault shares fell more than 10% in European trading on the news of the arrest, which occurred after the close of trading in Tokyo. Nissan shares were down more than 6% in Tokyo trading Tuesday.

The Nissan-Renault-Mitsubishi alliance stops well short of being a full-blown merger, but the three companies pool technology, basic components, research and development, creating global scale for companies that on their own would be dwarfed by bigger competitors like Volkswagen and Toyota Motor Corp. Together the three partners pumped out 10.6 million vehicles last year, with big market positions in the U.S., Asia and Europe.

While Nissan is the dominant member of the alliance in terms of size and financial health, Renault has the edge in the boardroom. It owns 43% of Nissan, while Nissan owns 15% of Renault and vies with Paris, as another big shareholder, for influence. Mitsubishi joined the alliance after Nissan took a 34% stake in the company in 2016.

With or without Mr. Ghosn, analysts said fast-changing industry trends -- not a single executive -- are likely to dictate the future of the alliance. When it was first conceived, a prevailing view in the industry was that auto makers needed global scale to compete. But now they are locked in a battle with Silicon Valley over who dominates the future of personal mobility, and the outcome is open. Max Warburton, an automotive analyst at brokerage Bernstein Research, said the global scale Renault sought with Nissan may not be essential to confronting today's challenges.

Rather the imperative may be for Nissan and Renault to seek partnerships with tech companies to secure the technology and develop business models in an automotive world dominated by shared vehicles, self-driving cars and personal transportation that is connected to the internet.

"Perhaps the alliance will be fine without Mr. Ghosn -- his importance may be overstated. Or perhaps it will come apart at the seams," Mr. Warburton said.

Mr. Ghosn first developed a passion for cars as a boy growing up in Porto Velho, Brazil, and in Beirut. He has said he learned how to distinguish between different makes by the sounds of their horns.

He obtained an engineering degree at the prestigious École Polytechnique in Paris, and took a job at French tire maker Michelin SA, rapidly ascending the ranks before eventually joining Renault as the No. 2 executive. He cut costs sharply and then turned his attention to Nissan after the two companies announced a broader partnership.

In 2013, his No. 2 at Renault, Carlos Tavares, resigned days after publicly airing his frustration at waiting for his boss to retire. The French government has repeatedly slammed Renault over Mr. Ghosn's multimillion-dollar pay package. He accepted a steep pay cut earlier this year to win French approval for him to continue leading Renault.

His brashness and celebrity-CEO lifestyle also rankled some.

"I would have chosen me, too" to lead Nissan's revival, he wrote in his 2003 autobiography, a best seller in translation in Japan. In the fall of 2016, to celebrate their marriage, Mr. Ghosn and his second wife threw a party at the Grand Trianon at Versailles that was inspired by Sofia Coppola's 2006 film, "Marie Antoinette." Hired actors wore 18th century costumes and guests were served pastry towers, according to photographs of the event.

--Phred Dvorak and Chieko Tsuneoka in Tokyo contributed to this article.

Write to Sean McLain at sean.mclain@wsj.com, William Boston at william.boston@wsj.com and Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

November 20, 2018 02:47 ET (07:47 GMT)

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