Carlos Ghosn is in detention, and the Nissan-Renault
relationship shows signs of strain.
By Nick Kostov, Sean McLain, Yoko Kubota and Phred Dvorak
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 23, 2018).
The sudden, dramatic arrest of Carlos Ghosn, one of the auto
industry's most admired leaders, is exposing rifts in the global
alliance between Nissan Motor Co. and Renault SA that Mr. Ghosn
built and ruled for more than a decade.
Mr. Ghosn, Renault's chief executive and chairman, is accused of
failing to report $44 million in pay at Nissan, where he also
served as chairman. On Thursday, Nissan directors voted unanimously
to strip the chairmanship from Mr. Ghosn.
A Nissan internal investigation alleges Mr. Ghosn also spent
millions from an obscure Nissan fund to buy and renovate luxury
homes, according to a person familiar with the matter.
The Ghosn family believed the residences in Rio de Janeiro,
Beirut and other locations were corporate housing, whose purchase
went through the normal channels for Nissan approval, a person
familiar with the family said.
Mr. Ghosn, detained in a Japanese detention center, has not been
heard from publicly since his arrest hours after he arrived in
Tokyo Monday. He was unable to be reached for comment. Japan's
public broadcaster NHK said former prosecutor Motonari Otsuru, now
in private practice, is representing Mr. Ghosn. The lawyer's office
declined to comment.
In Mr. Ghosn's absence, long-festering stresses are surfacing
that reveal a far more conflict-ridden alliance than previously
suspected, according to interviews with more than a dozen people
connected to the pioneering marriage between the French and
Japanese car makers.
At Renault, where sales are smaller than Nissan's, some union
officials have long worried they would be absorbed in a creeping
"Nissanization." At Nissan, where many Japanese employees grumble
that foreigners are promoted faster and paid better, some talk
darkly of an attempt by old-timers to return the company to its
roots and eject foreigners.
Hours after Mr. Ghosn's arrest, the board of Renault hastily
gathered at the car maker's headquarters in Paris for an informal
meeting. The directors assembled around a U-shaped table on the
banks of the Seine and by phone. Two board representatives from
Nissan didn't join.
Nissan had released a statement denouncing its longtime leader's
term as rife with misconduct. Nissan Chief Executive Hiroto Saikawa
had called a news conference to say Mr. Ghosn made personal use of
company funds. Mr. Ghosn has not been charged. The offense, if
proved, could put Mr. Ghosn in prison for a decade.
Renault's directors were in shock -- over Nissan's handling of
the matter.
'Very violent'
A Renault director at the snap meeting told fellow board
members, "I found this very, very violent."
At the meeting, Renault lead independent director Philippe
Lagayette read aloud a message from Mr. Saikawa saying Nissan had
found evidence of potential wrongdoing at Renault-Nissan BV, a
Dutch-based joint venture between the two auto makers.
The topic touched a nerve, because Renault-Nissan BV is the
corporate entity that links the two auto makers Mr. Ghosn helped
ally. Its board is evenly divided between the companies'
representatives, with Mr. Ghosn serving as chairman and Mr. Saikawa
as vice chairman. Renault directors worried that with Mr. Ghosn in
a Japanese jail cell, the balance would tip toward Mr. Saikawa and
Nissan.
They also didn't want Japanese investigators poring over the
auto alliance's records without Renault's involvement. "We won't
let them investigate alone," one board member told the group.
The next evening, Tuesday, Renault's board convened an official
meeting. This time Nissan's representatives were told they couldn't
take part, people familiar with the matter said, because they were
deemed to have a conflict of interest.
Two days later, Nissan's board held a four-hour meeting during
which directors were briefed on the allegations against Mr.
Ghosn.
People familiar with Renault's board said it had asked Nissan to
postpone the decision on Mr. Ghosn until more information was
available from Tokyo authorities.
Nissan acts
Nissan's board went ahead with stripping Mr. Ghosn of his
chairman's title.
In a letter to Renault's board reviewed by The Wall Street
Journal, Nissan's board said it wouldn't allow Renault to name a
replacement because Mr. Ghosn remains a Nissan director and, in
Nissan's view, Renault isn't entitled to any further representation
on the Nissan board. A Nissan spokesman said removing Mr. Ghosn as
a director would require a shareholder vote.
Renault's request to Nissan for more information about the
allegations against Mr. Ghosn hit a brick wall. The Nissan board
letter said it couldn't give information because it might be
perceived as interfering with the separate probe by Tokyo
prosecutors.
A Renault spokesman declined to comment.
A Nissan statement after the board meeting Thursday said Mr.
Ghosn committed serious misconduct in three areas: incorrectly
reporting his compensation over many years, using a company
investment fund for personal purposes and inappropriately filing
expenses.
The two auto makers came together in 1999, when Renault bailed
out a failing Nissan and sent Mr. Ghosn, its No. 2 executive, to
lead a turnaround. Mr. Ghosn took Nissan from losses to become one
of the world's most profitable car makers in a few years. But his
cost-slashing methods stirred up resentment in Japan.
Uneasy Allies
"The alliance was not popular, neither with Nissan executives
nor Renault executives, even though it was presented as a beautiful
collaboration," said one former Nissan manager who likened Mr.
Saikawa's move against Mr. Ghosn to the betrayal of Julius Caesar
by Brutus.
Mr. Saikawa fielded a question at his news conference on whether
Mr. Ghosn's ouster was a coup d'état. "I don't see it that way," he
answered.
French economy and finance minister Bruno Le Maire said this
week that the French government, which owns 15% of Renault,
believed in "the rule of law" and had seen no evidence "justifying
the accusations brought against Carlos Ghosn."
On Thursday, Mr. Le Maire held a roughly one hour meeting with
his Japanese counterpart Hiroshige Seko, in Paris. After the
meeting, the two ministers reaffirmed their "strong support" for
the alliance formed between Renault and Nissan, "and their shared
wish to maintain this winning cooperation."
Mr. Ghosn's family has been unable to reach him, the person
close to the family said, although the Brazilian-born executive,
who has French citizenship, received a visit from France's
ambassador to Japan, according to a French embassy spokesman.
Lawyers familiar with the Tokyo Detention House said those held
there are treated the same regardless of their stature. If his
experience is typical, Mr. Ghosn is living in a room of roughly 80
square feet, waking at 7 a.m. and going to bed at 9 p.m. Detainees
are allowed to take a bath two or three times a week and get three
meals a day consisting of a mix of rice and barley, and side
dishes.
The lawyers said daytime is likely taken up largely with
prosecutors' interrogations, which attorneys for suspects aren't
allowed to attend, although they can pay shorter visits.
Party at Versailles
It's a stark departure from Mr. Ghosn's jet-setting lifestyle
where he splits time between homes in Tokyo and Paris, and is
ferried by corporate jets. In 2017, Town and Country Magazine
published a spread on Mr. Ghosn and his wife's Marie
Antoinette-themed wedding party at Versailles, featuring actors in
18th century costumes and wigs, and tables piled high with cakes
and pastries.
On Monday, the day of his arrest, Mr. Ghosn landed in a
Gulfstream jet at Tokyo's Haneda Airport at 3:41 p.m. after a
5,500-mile trip from Beirut. He had an appointment to meet his
daughter for a sushi dinner. Instead, Japanese prosecutors boarded
the jet. Less than five hours later, he was under arrest in central
Tokyo.
The main accusation against Mr. Ghosn and another executive
arrested, Nissan director and longtime Ghosn aide Greg Kelly, is
that they conspired to underreport Mr. Ghosn's compensation for at
least five years.
Prosecutors suspect that the allegedly missing $44 million
includes a kind of incentive compensation called share-appreciation
rights, which pay out when the stock tops a certain level, said a
person familiar with the investigation. Like Mr. Ghosn, Mr. Kelly
hasn't been formally charged.
Mr. Kelly couldn't be reached for comment.
Too much power?
Mr. Saikawa observed at his news conference that Mr. Ghosn's
decisive, hands-on style had downsides when he gathered too much
power.
"Having someone in the seat of power for so long, I felt it
started to show problems, not only from a governance perspective
but from an operational perspective as well," Mr. Saikawa said.
For many at Nissan, Mr. Saikawa now represents a chance to take
the leading position in the alliance with Renault that they feel
the Japanese company deserves. Last year, Nissan's sales were
around 60% of the Nissan and Renault total. Over the years, Nissan
has floated the idea of either increasing its 15% stake in Renault
or getting Renault to reduce its 43% stake in Nissan.
Key player
"We should recognize ourselves as the key player in the
alliance," Mr. Saikawa said in an interview with The Wall Street
Journal in September 2017, about four months after he was appointed
Nissan CEO to succeed Mr. Ghosn. "We should be the main driver of
the alliance growth and integration." Since 2016, the alliance has
included a third auto company, Mitsubishi Motors Corp.
Nissan and Renault have feuded in technology too, with some
Nissan engineers saying their company is better at advanced
technologies and expressing frustration at what they viewed as
Renault's cost-driven approach.
A case in point was the companies' tug of war over electric-car
batteries. Around 2010, Nissan developed its own batteries in-house
to power its Leaf electric car. It was soon facing pressure from
Renault to switch to the cheaper batteries Renault was getting from
South Korea's LG Chem Ltd.
The Renault team said Nissan's batteries were too expensive.
Nissan said its own were safer, and stuck with them. But as
low-priced Chinese-made batteries emerged, Nissan in August agreed
to sell its car-battery business.
Mr. Ghosn kept the parties from making their grievances too open
through such tensions.
Mr. Ghosn's daughter never got to see her father at their
planned dinner date in Tokyo Monday, said the person close to the
family. She was waiting at his apartment when she got a news alert
on her phone telling of her father's arrest.
--Mark Maremont and Christina Rogers contributed to this
article.
Write to Nick Kostov at Nick.Kostov@wsj.com, Sean McLain at
sean.mclain@wsj.com, Yoko Kubota at yoko.kubota@wsj.com and Phred
Dvorak at phred.dvorak@wsj.com
(END) Dow Jones Newswires
November 23, 2018 02:47 ET (07:47 GMT)
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