Renault names acting CEO but keeps Carlos Ghosn on the payroll

Renault appointed an acting chief executive on Tuesday but stopped short of removing Carlos Ghosn as CEO and...

Posted: Nov 21, 2018 3:18 AM
Updated: Nov 21, 2018 3:18 AM

Renault appointed an acting chief executive on Tuesday but stopped short of removing Carlos Ghosn as CEO and chairman following his arrest on suspicion of financial misconduct in Japan.

The company said in a statement that it would elevate chief operating officer Thierry Bolloré on an interim basis, giving him the same powers that Ghosn enjoys as CEO. It said independent director Philippe Lagayette would chair board meetings "during this period."

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Ghosn was detained by Japanese authorities on Monday after an internal investigation at Nissan, where he is also chairman, revealed "significant acts of misconduct" over many years.

The Japanese carmaker accused Ghosn of significantly under-reporting his compensation and misusing company assets. Japanese public broadcaster NHK reported Tuesday that the industry veteran had failed to properly disclose homes provided by Nissan in four countries.

NHK also said that prosecutors suspect Ghosn may have pocketed money that was meant for other executives at Nissan (NSANY).

Ghosn has not yet responded to the allegations.

"At this stage, the Board is unable to comment on the evidence seemingly gathered against Mr. Ghosn by Nissan and the Japanese judicial authorities," Renault said in its statement, adding it was asking Nissan to share all information related to the investigation into Ghosn.

Prior to the announcement, analysts said it was unlikely that Ghosn would be able hold onto his positions at Renault or Nissan, in which the French carmaker owns a 43% stake.

Shares in both companies were punished this week, reflecting concerns that the scandal could fracture the global auto alliance that Ghosn forged over the past two decades.

Nissan's board will meet Thursday, and it is expected to remove Ghosn from his position. Mitsubishi Motors (MMTOF), the third member of the alliance, has asked its board of directors to "promptly remove" Ghosn as chairman.

The three companies make up an unusual global alliance that employs 470,000 people, operates 122 plants and sold over 10 million vehicles in 2017. It would not exist without Ghosn, who is known in the industry as a skilled turnaround expert and savvy politician.

'Le cost killer'

Ghosn started his career at Michelin before rising through the ranks at Renault. He orchestrated a major restructuring of the struggling French carmaker, returning it to profitability and earning himself the nickname "Le cost killer."

The Brazilian-born executive joined Nissan in 1999 when it formed an alliance with Renault, but he kept his responsibilities at Renault (RNSDF) as part of an unusual arrangement. Ghosn is also credited with executing a stunning turnaround at Nissan and was named its chief executive in 2001.

He was made CEO of Renault in 2005, becoming the first executive to run two Fortune Global 500 companies simultaneously. Mitsubishi joined the alliance in 2016, when Nissan took a controlling stake in the smaller Japanese carmaker.

The companies are linked through a complicated series of equity stakes. Nissan and Renault own pieces of each other, but Nissan's stake in its French partner does not come with voting rights. Nissan also has a 34% stake in Mitsubishi. Politics is a factor: The French state maintains 15% ownership in Renault.

French Finance Minister Bruno Le Maire said earlier Tuesday that he would meet with representatives from Renault to discuss appointing interim management because Ghosn is "no longer capable of leading the group."

Future of the alliance

Ghosn's latest project was to deepen ties between Renault, Nissan and Mitsubishi. The alliance structure, which allows the companies to pool resources and share costs, has been explored by other carmakers in recent years.

Many top executives in the alliance report to three separate CEOs — but Ghosn held it all together. The big question now is whether the alliance can survive without him.

Ghosn told the Financial Times in June that the alliance he forged was "irreversible."

"We created a lot of synergies, and scale is the name of the game. But I respect that some stakeholders are saying, 'Hey, wait a minute, what's gonna happen after you're gone?' " he told the newspaper.

The carmakers could struggle to compete on their own should the alliance break up. The auto industry is under intense pressure to develop mass-market electric cars and autonomous vehicles. Tech companies are eager to beat them to the punch.

The governments of France and Japan appear determined to keep it alive. They issued a joint statement on Tuesday reaffirming their support for the alliance and calling it "one of the greatest symbols of Franco-Japanese industrial cooperation."

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