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Renault Under Pressure as Carlos Ghosn Remains in Jail Renault Under Pressure as Carlos Ghosn Remains in Jail
(about 9 hours later)
PARIS — When Carlos Ghosn was arrested on his private jet in Japan last month on charges of violating the nation’s financial reporting laws, Nissan promptly removed him as its chairman. At the French automaker Renault, the management stuck by Mr. Ghosn, its chief executive and chairman.PARIS — When Carlos Ghosn was arrested on his private jet in Japan last month on charges of violating the nation’s financial reporting laws, Nissan promptly removed him as its chairman. At the French automaker Renault, the management stuck by Mr. Ghosn, its chief executive and chairman.
But an intensifying storm is putting pressure on Renault’s defensive posture.But an intensifying storm is putting pressure on Renault’s defensive posture.
Mr. Ghosn was detained just as Renault was suffering a slump in sales in Europe and confronting a worsening power struggle with Nissan, its longtime partner. There is even a political dimension. In the Yellow Vest protests that have galvanized France, Mr. Ghosn has become a symbol of excess wealth and runaway corporate power.Mr. Ghosn was detained just as Renault was suffering a slump in sales in Europe and confronting a worsening power struggle with Nissan, its longtime partner. There is even a political dimension. In the Yellow Vest protests that have galvanized France, Mr. Ghosn has become a symbol of excess wealth and runaway corporate power.
Renault’s position is becoming increasingly untenable the longer Mr. Ghosn sits in jail.Renault’s position is becoming increasingly untenable the longer Mr. Ghosn sits in jail.
His chances of being released soon from his tiny prison cell in Tokyo, where he has been held since Nov. 19, dimmed considerably on Sunday after a Japanese judge ruled that he could be held at least through Jan. 1 and perhaps longer, to give prosecutors more time to question him. Before that, on Friday, the authorities arrested Mr. Ghosn again based on new allegations of financial misconduct.His chances of being released soon from his tiny prison cell in Tokyo, where he has been held since Nov. 19, dimmed considerably on Sunday after a Japanese judge ruled that he could be held at least through Jan. 1 and perhaps longer, to give prosecutors more time to question him. Before that, on Friday, the authorities arrested Mr. Ghosn again based on new allegations of financial misconduct.
At stake is not only Mr. Ghosn’s position atop Renault, but also the fate of the company’s longstanding alliance with Nissan, which Mr. Ghosn also led. Renault and Nissan are being forced to confront the frictions between them and agree on new leadership for their unique auto-making union.At stake is not only Mr. Ghosn’s position atop Renault, but also the fate of the company’s longstanding alliance with Nissan, which Mr. Ghosn also led. Renault and Nissan are being forced to confront the frictions between them and agree on new leadership for their unique auto-making union.
Mr. Ghosn, a larger-than-life figure who forged a global auto empire out of Renault, Nissan and Mitsubishi Motors, which joined in 2016, was stripped of his chairmanship posts by both Japanese carmakers after an investigation by Nissan alleged that he had illegally omitted reporting millions in compensation in Japanese securities filings.Mr. Ghosn, a larger-than-life figure who forged a global auto empire out of Renault, Nissan and Mitsubishi Motors, which joined in 2016, was stripped of his chairmanship posts by both Japanese carmakers after an investigation by Nissan alleged that he had illegally omitted reporting millions in compensation in Japanese securities filings.
But at Renault, where Mr. Ghosn was a star executive for two decades, top management refrained from passing judgment, while a temporary leadership team runs the company in his absence.But at Renault, where Mr. Ghosn was a star executive for two decades, top management refrained from passing judgment, while a temporary leadership team runs the company in his absence.
It’s a difficult time for the automakers to be uncertain about their leadership. Demand for cars in China, the United States and Europe, the three biggest auto markets, is falling. Analysts agree that the alliance that Renault and Nissan founded in 1999 to share purchasing and expertise is essential if the companies are to remain competitive in an industry where size provides a crucial advantage.It’s a difficult time for the automakers to be uncertain about their leadership. Demand for cars in China, the United States and Europe, the three biggest auto markets, is falling. Analysts agree that the alliance that Renault and Nissan founded in 1999 to share purchasing and expertise is essential if the companies are to remain competitive in an industry where size provides a crucial advantage.
Sales of new Renault cars in Europe, the company’s core market, plunged 16 percent in November, according to the European Automobile Manufacturers Association. And it is losing ground in market share there.Sales of new Renault cars in Europe, the company’s core market, plunged 16 percent in November, according to the European Automobile Manufacturers Association. And it is losing ground in market share there.
In the United States, Nissan is facing the consequences of a strategy focused on winning market share at the expense of profit, championed by Mr. Ghosn. Nissan is trying to dial back its discounts just as the overall market enters a downturn, and as the Ghosn arrest tarnishes its image.In the United States, Nissan is facing the consequences of a strategy focused on winning market share at the expense of profit, championed by Mr. Ghosn. Nissan is trying to dial back its discounts just as the overall market enters a downturn, and as the Ghosn arrest tarnishes its image.
“It’s going to be hard to ratchet back incentives when other companies are ratcheting them up,” said Michelle Krebs, executive analyst at Autotrader, an online buying and selling platform. “Their strategy came home to roost.”“It’s going to be hard to ratchet back incentives when other companies are ratcheting them up,” said Michelle Krebs, executive analyst at Autotrader, an online buying and selling platform. “Their strategy came home to roost.”
Renault needs Nissan, the dominant performer in the alliance, to continue contributing to Renault financially. Some Renault officials are concerned that Nissan’s operating margin has been slipping, including since the scandal erupted.Renault needs Nissan, the dominant performer in the alliance, to continue contributing to Renault financially. Some Renault officials are concerned that Nissan’s operating margin has been slipping, including since the scandal erupted.
Renault officials have been waiting to hear Mr. Ghosn state his own defense before making a formal decision about his future with the company, according to two people familiar with the situation. That has been impossible while he has been incarcerated, unable to receive visits from his lawyers, family or anyone at Renault.Renault officials have been waiting to hear Mr. Ghosn state his own defense before making a formal decision about his future with the company, according to two people familiar with the situation. That has been impossible while he has been incarcerated, unable to receive visits from his lawyers, family or anyone at Renault.
If Renault hears from Mr. Ghosn soon, the board may meet in January, ahead of a formal February meeting, to discuss how to proceed, one of those people said.If Renault hears from Mr. Ghosn soon, the board may meet in January, ahead of a formal February meeting, to discuss how to proceed, one of those people said.
Officially, Renault and the French government, which is Renault’s biggest shareholder, say they support the presumption of Mr. Ghosn’s innocence. But behind closed doors, it has become increasingly difficult to see how Mr. Ghosn can continue his leadership.Officially, Renault and the French government, which is Renault’s biggest shareholder, say they support the presumption of Mr. Ghosn’s innocence. But behind closed doors, it has become increasingly difficult to see how Mr. Ghosn can continue his leadership.
Mr. Ghosn and Greg Kelly, a Nissan director who was also arrested, are charged with underreporting more than $40 million in Mr. Ghosn’s Nissan compensation over five years. Investigators in Japan are also looking into a Dutch subsidiary of the Nissan-Renault alliance that Mr. Kelly allegedly used as a slush fund to pay for some of Mr. Ghosn’s luxurious homes and other expenses related to a high-flying executive lifestyle.Mr. Ghosn and Greg Kelly, a Nissan director who was also arrested, are charged with underreporting more than $40 million in Mr. Ghosn’s Nissan compensation over five years. Investigators in Japan are also looking into a Dutch subsidiary of the Nissan-Renault alliance that Mr. Kelly allegedly used as a slush fund to pay for some of Mr. Ghosn’s luxurious homes and other expenses related to a high-flying executive lifestyle.
On Friday, Japanese prosecutors added a new allegation: that Mr. Ghosn shifted more than $16 million in personal losses incurred a decade ago to Nissan. The Japanese authorities have not indicted Mr. Ghosn on any charges related to the accusation, but have allowed prosecutors to continue holding him just when it looked as if he might be released on bail.On Friday, Japanese prosecutors added a new allegation: that Mr. Ghosn shifted more than $16 million in personal losses incurred a decade ago to Nissan. The Japanese authorities have not indicted Mr. Ghosn on any charges related to the accusation, but have allowed prosecutors to continue holding him just when it looked as if he might be released on bail.
Renault’s lawyers have been poring over documents handed over only recently by Nissan’s lawyers, and providing their legal opinions to the Renault board.Renault’s lawyers have been poring over documents handed over only recently by Nissan’s lawyers, and providing their legal opinions to the Renault board.
Mr. Ghosn maintains his innocence, according to his Japanese-appointed lawyer. But a stream of coverage about his lucrative compensation, luxurious homes and an over-the-top wedding reception for him and his new wife at the palace at Versailles have rankled sensibilities in France.Mr. Ghosn maintains his innocence, according to his Japanese-appointed lawyer. But a stream of coverage about his lucrative compensation, luxurious homes and an over-the-top wedding reception for him and his new wife at the palace at Versailles have rankled sensibilities in France.
During the recent Yellow Vest protests in France denouncing inequality, Mr. Ghosn was sometimes held up as a symbol of outsize wealth and corruption. Photos of his Versailles wedding party, featuring actresses dressed as Marie Antoinette, were passed around mockingly on social media.During the recent Yellow Vest protests in France denouncing inequality, Mr. Ghosn was sometimes held up as a symbol of outsize wealth and corruption. Photos of his Versailles wedding party, featuring actresses dressed as Marie Antoinette, were passed around mockingly on social media.
The optics are proving tricky, especially for the French government, which holds a 15 percent stake in Renault. President Emmanuel Macron is struggling in opinion polls, with average French people seeing him as a “president of the rich.”The optics are proving tricky, especially for the French government, which holds a 15 percent stake in Renault. President Emmanuel Macron is struggling in opinion polls, with average French people seeing him as a “president of the rich.”
Even if Mr. Ghosn is freed on bail, it is unclear that he would be allowed to leave Japan. He would still have to prepare for lengthy court proceedings, making it nearly impossible for him to dedicate time to running Renault, much less the alliance.Even if Mr. Ghosn is freed on bail, it is unclear that he would be allowed to leave Japan. He would still have to prepare for lengthy court proceedings, making it nearly impossible for him to dedicate time to running Renault, much less the alliance.
Prosecutors are expected to depict Mr. Ghosn as a powerful executive who overstepped bounds by seeking ways to amass a hidden fortune on top of his already lucrative compensation.Prosecutors are expected to depict Mr. Ghosn as a powerful executive who overstepped bounds by seeking ways to amass a hidden fortune on top of his already lucrative compensation.
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Renault’s priority is to smooth frictions with Nissan over governance and the future leadership of the alliance, which grew to depend solely on Mr. Ghosn. None of the automakers appear willing to allow a single dominant figure to run operations or accumulate power again the way he did.Renault’s priority is to smooth frictions with Nissan over governance and the future leadership of the alliance, which grew to depend solely on Mr. Ghosn. None of the automakers appear willing to allow a single dominant figure to run operations or accumulate power again the way he did.
Tensions have risen in the face of suspicions in France that Nissan may be using the opportunity to reshape the alliance’s balance of power. There are also concerns that Nissan dragged its feet in presenting the French with evidence of Mr. Ghosn’s alleged wrongdoing.Tensions have risen in the face of suspicions in France that Nissan may be using the opportunity to reshape the alliance’s balance of power. There are also concerns that Nissan dragged its feet in presenting the French with evidence of Mr. Ghosn’s alleged wrongdoing.
Renault owns a 43 percent stake in Nissan, and Nissan holds a 15 percent share of Renault without voting rights. Nissan has said it wants to rebalance the alliance ever since a dramatic episode in 2015, when Mr. Macron, then France’s economy minister, ordered a surprise increase in the French government’s stake in Renault, which was meant to double the state’s voting rights.Renault owns a 43 percent stake in Nissan, and Nissan holds a 15 percent share of Renault without voting rights. Nissan has said it wants to rebalance the alliance ever since a dramatic episode in 2015, when Mr. Macron, then France’s economy minister, ordered a surprise increase in the French government’s stake in Renault, which was meant to double the state’s voting rights.
The move, which Mr. Ghosn opposed in a bitter fight with Mr. Macron, rattled Nissan, which threatened to leave the alliance’s master agreement. To calm tensions, Renault agreed not to interfere in Nissan’s governance, including Nissan shareholder decisions on the appointment, dismissal and compensation of Nissan board members.The move, which Mr. Ghosn opposed in a bitter fight with Mr. Macron, rattled Nissan, which threatened to leave the alliance’s master agreement. To calm tensions, Renault agreed not to interfere in Nissan’s governance, including Nissan shareholder decisions on the appointment, dismissal and compensation of Nissan board members.
That has become a poison pill for Renault after the arrest of Mr. Ghosn, who held one of the three seats that Renault is allotted on Nissan’s board. Now that the seat is empty, all Renault can do for now is plead with Nissan to fill the seat again — a step that Nissan’s chief executive, Hiroto Saikawa, declined to take last week. That has become a poison pill for Renault after the arrest of Mr. Ghosn, who holds one of the three seats that Renault is allotted on Nissan’s board. Now that Mr. Ghosn is unable to take part in meetings, all Renault can do for now is plead with Nissan to call a special shareholder meeting to name a replacement — a step that Nissan’s chief executive, Hiroto Saikawa, declined to take last week.
Mr. Saikawa met with Renault’s chief operating officer, Thierry Bolloré, in Amsterdam on Thursday at the headquarters of Renault-Nissan BV. It was the first time the men have met face-to-face since Mr. Saikawa held a news conference in Tokyo last month to announce Nissan’s allegations.Mr. Saikawa met with Renault’s chief operating officer, Thierry Bolloré, in Amsterdam on Thursday at the headquarters of Renault-Nissan BV. It was the first time the men have met face-to-face since Mr. Saikawa held a news conference in Tokyo last month to announce Nissan’s allegations.
Both companies reaffirmed their commitment to the alliance, and discussed future projects and other elements of Renault-Nissan operations.Both companies reaffirmed their commitment to the alliance, and discussed future projects and other elements of Renault-Nissan operations.