Why the Carlos Ghosn scandal matters

He was the driving force behind one of the leading powers in the auto industry, an alliance of three separat...

Posted: Nov 20, 2018 3:57 AM
Updated: Nov 20, 2018 3:57 AM

He was the driving force behind one of the leading powers in the auto industry, an alliance of three separate companies that employs over 470,000 people, operates 122 plants and sold 10.6 million vehicles in 2017.

And now Carlos Ghosn is in deep trouble.

Business figures

Carlos Ghosn

Scandals

Automakers and manufacturing

Automotive industry

Business and industry sectors

Business, economy and trade

Companies

Nissan Motor Corporation

Renault SA

The auto industry was rocked Monday when Nissan said that an internal investigation had uncovered evidence that Ghosn had lied about his income over many years and misused company assets.

With 40 years of industry experience, Ghosn is no ordinary automotive executive.

In addition to his position at Nissan, where he was also CEO until last year, he is chairman at Mitsubishi Motors. He currently serves as both CEO and chairman of French carmaker Renault.

The three companies have more in common than a single chairman. They also share ownership stakes.

So while they sell to different customers under different brands, and are based on two continents, the trio of automakers function in some key ways like a single entity.

Many top executives in the alliance report to three separate CEOs. Major decisions by each alliance member on products and investment are made only with agreement of the other two partners.

Ghosn was the driving force behind the alliance. He took what had been three second-tier automakers and brought them together into a single power with joint sales roughly on par with Volkswagen, Toyota and General Motors.

Between them, Renault (RNSDF), Nissan (NSANY) and Mitsubishi (MMTOF) make one of every nine cars sold around the world.

The industry's most successful alliance

There have been other auto industry alliances over the years, but none had worked so well or brought the different parties so close together. Ghosn showed the industry that alliances can work and produce billions in savings.

The alliance started with Renault and Nissan coming together 19 years ago. Renault holds a 43.5% stake in Nissan, while Nissan owns 15% of Renault. Mitsubishi joined in 2016 when Nissan purchased 34% of its stock.

At a press conference Monday evening in Japan, Nissan CEO Hiroto Saikawa said he's confident the cooperation between the alliance partners will continue even though Nissan is seeking to remove Ghosn as chairman.

He said he thinks it's very possible the three partners could agree on a single joint chairman as a replacement.

"I wouldn't say the impact is zero," he said through a translator. "However we will do our best [to minimize the impact]. This alliance partnership itself will not be affected by this event."

The global auto industry needs to invest tens of billions of dollars to develop electric and autonomous cars — before tech companies get there. Other automakers, such as Ford (F) and Volkswagen (VLKAF), are in talks for new alliances.

Rebecca Lindland, a senior analyst with Cox Automotive, said the scale of the challenge facing the auto industry means the alliance created by Ghosn will survive. But it won't be business as usual.

"It doesn't break apart. But there's going to be disruptions for sure," she said.

The alliance had been planning for life after Ghosn, who was expected to retire as CEO of Renault by 2022. Lindland said that an accelerated search for a replacement would likely cause disruption in the top ranks.

"There may be plenty of people who's day-to-day jobs won't change," she said. "But there is going to be some executive fallout. Anytime there is disruption at top, that is this sudden, it's bound to wreak a little havoc."

Mitsubishi said it was proposing that its board "promptly" remove Ghosn from that position, and Renault said its board would meet "very shortly."

Mississippi Coronavirus Cases

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Reported Deaths: 6783
CountyCasesDeaths
DeSoto19731230
Hinds18881393
Harrison16780282
Rankin12787265
Jackson12643229
Lee9703161
Madison9484203
Jones8005147
Forrest7250138
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Warren4138115
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Marshall404492
Monroe3993128
Union396474
Neshoba3822170
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Hancock350277
Leflore3389119
Sunflower319286
Tate303374
Pike301796
Scott295271
Alcorn292463
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Holmes182770
Clay179251
Stone173029
Tallahatchie171439
Clarke169672
Calhoun158528
Smith153033
Yalobusha145536
Greene127933
Walthall124540
Noxubee123131
Montgomery122939
Perry122235
Lawrence120621
Carroll119025
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Webster111132
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Tunica99523
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Benton93924
Humphreys93027
Kemper90423
Quitman77414
Franklin76219
Choctaw69817
Jefferson62827
Wilkinson62427
Sharkey49117
Issaquena1676
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Alabama Coronavirus Cases

Cases: 498076

Reported Deaths: 10094
CountyCasesDeaths
Jefferson716711387
Mobile36294737
Madison32616468
Tuscaloosa24340421
Montgomery22739519
Shelby22174218
Baldwin19873289
Lee15039157
Calhoun13832293
Morgan13753254
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Houston10124264
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Limestone9420138
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Cullman8984182
Lauderdale8612214
DeKalb8489175
Talladega7606165
Walker6585259
Jackson6545104
Autauga632492
Blount6236127
Colbert6001121
Coffee5264103
Dale4671107
Russell406933
Franklin399878
Covington3993106
Chilton3898103
Escambia379173
Tallapoosa3622143
Clarke344053
Chambers3431111
Dallas3422142
Pike293373
Marion288695
Lawrence284985
Winston258368
Bibb246160
Geneva240370
Marengo238857
Pickens225457
Barbour213651
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Butler201466
Henry183541
Cherokee178039
Monroe166739
Randolph164840
Washington156836
Macon147745
Crenshaw146255
Clay145954
Cleburne139841
Lamar133733
Lowndes132751
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Perry106127
Sumter99732
Coosa90224
Greene88532
Choctaw55323
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