How Carlos Ghosn arrest may impact Renault-Nissan-Mitsubishi Alliance

Carlos
Ghosn is the chairman and CEO of the Renault-Nissan-Mitsubishi
Alliance.
Thomson
Reuters

• Renault-Nissan-Mitsubishi
  Alliance chairman and CEO Carlos Ghosn was
  arrested by Japanese law enforcement on
  Monday.
• Nissan revealed that an internal
  investigation concluded that Ghosn allegedly under-reported his
  income and misused corporate assets.
• Nissan said it will dismiss Ghosn as its
  chairman.
• Ghosn allegedly reported only half of the $88.7 million
  he earned in a five year period ending in March
  2015. 
• Ghosn is the mastermind behind the
  Renault-Nissan-Mitsubishi Alliance, which sold more than 10.6
  million cars in 2017, the most of any carmaker in the
  world. 

Renault-Nissan-Mitsubishi Alliance chairman and CEO Carlos Ghosn
was arrested by Japanese law enforcement on Monday. The arrest
comes after Nissan revealed that an internal investigation
concluded that the long-time executive allegedly under-reported
his income and misused corporate assets.

According to reports for Japanese media outlets NHK and Kyodo News, Ghosn allegedly
reported only half of the $88.7 million he earned in a five
year period ending in March 2015. 

In a statement, Nissan announced that CEO Hiroto Saikawa will ask
the company board to remove Ghosn from his chairmanship.

At a press conference on Monday, the Nissan CEO said he felt
“despair, indignation, and resentment.”

Saikawa, who served as Ghosn’s co-CEO at Nissan between
November 2016 and March 2017, also bowed and apologized to the
public 

Nissan CEO Hiroto Saikawa
bows in apology at Monday’s press conference.
REUTERS/Issei Kato

The Brazilian-born Ghosn also serves as the chairman of
Mitsubishi Motors; chairman and CEO of Renault; and chairman and
CEO of The Alliance, a carmaking unit consisting of Nissan,
Renault, and Mitsubishi. 

It’s unclear how his arrest will affect his positions with the
Alliance. 

The Alliance was not immediately available for comment. 

Monday’s news marks a stunning downfall for an executive
long-regarded as the man who saved Nissan nearly 20 years
ago. 

He is also the mastermind behind the Alliance, which sold more
than 10.6 million cars in 2017, the most of any automaker in the
world.

With Ghosn’s future as the Alliance’s leader in question, the
conglomerate’s future also looks to be less clear than before
right as the envisioned synergies of the venture begin to bear
fruit.

“This benefits of the Alliance are finally coming into fruition,”
Rebecca Lindland, a Kelley Blue Book executive analyst, told
Business Insider. “There’s some platform sharing, technology from
the new Nissan Leaf EV is going to go across several brands.”

In the hours after news broke of Ghosn’s alleged behavior, both
Nissan and Renault reaffirmed their commitment to the carmaking
venture.

Read more: Nissan slides after Chairman
Carlos Ghosn is arrested over financial misconduct
allegations
.

In a statement from Renault, a group of the company’s directors
expressed “their dedication to the defense of Renault’s interest
in the Alliance.” Saikawa also said during his press conference
that the Alliance will not be affected by Ghosn’s
ouster.

But there are still a lot of questions about how exactly
the incident will impact the stability of the
Alliance. 

Shares of both Nissan and Renault took steep dives during
Monday trading. 

In a note released on Monday, Citi Group indicated that it
does not foresee a dissolution of the Alliance.

“While unlikely, in our view, a drastic change to the
status quo with Nissan could also result in a period of
instability for the stock,” Citi said. 

Renault
CEO Carlos Ghosn poses next to the new Renault Scenic during the
Renault press conference as part of the Geneva Motor Show 2016 on
March 1, 2016 in Geneva, Switzerland.
Harold Cunningham/Getty Images

Lindland agrees. 

“Mr. Ghosn masterminded the Renault-Nissan-Mitsubishi
alliance, balancing three different companies with demanding
elegance,” the analyst said. “The alliance will continue without
him, but this misconduct will cause disruption and uncertainty at
the top for a while.”

However, expected a change in management style at Nissan
and the Alliance.

“I think we could see a committee running the alliance,” Lindland
said. “One of the things emphasized over and over at during
Nissan’s press conference was the individual power that Mr. Ghosn
held and I think that’s something Nissan and The Alliance will
try to change in the future. ”