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Nissan and Renault are wrestling with the fallout from Carlos Ghosn's arrest

November 20, 2018 Business 0 Views PARIS – A leadership crisis in the world's largest bilalliance was deepened Tuesday when…

PARIS – A leadership crisis in the world’s largest bilalliance was deepened Tuesday when the French car manufacturer Renault prepared to seek an interim authority to fill the gap left by the arrest of Carlos Ghosn in Japan over alleged economic misconduct.

Prosecutors investigate allegations that Ghosn, head of Renault, chairman of Nissan, and chairman of the board of Mitsubishi Motors, underestimated his taxable income by half for several years.

Mr. Ghosn, who became one of the car industry’s most prominent executives, had been acclaimed to rethink how vehicle manufacturers could share technology and innovate in a competitive global market. His arrest on Monday stunned the sector and sent Nissan’s share price to a two-year low on Tuesday.

But even when Nissan and Mitsubishi were ready to quickly break ties with Ghosn, the French government, Renault’s largest shareholder

French economist Bruno Le Maire said Tuesday that Ghosn was no longer able to lead Renault. because of its problems in Japan.

But Mr Le Maire said that France had no evidence of the crimes that Ghosn was accused of committing in Japan, and would not require him to be removed from Renault, a French company icon. Renault board members prepared to meet in an emergency session on Tuesday.

In a joint statement released on Tuesday afternoon, Le Maire and Hiroshige Seko, Japan’s Minister for Economic Affairs, said they had spoken on the phone and “confirmed the strong support of the French and Japanese governments to the alliance formed between Renault and Nissan.”

Mr. Ghosn was imprisoned on his private jet at Haneda Airport, which serves Tokyo, after a whisperer at Nissan claimed he had underreported compensation to the Japanese government. Another executive, Greg Kelly, as the authorities described as the system’s architect, was also seized.

Neither Mr Ghosn nor Kelly could be reached for comments.

After a month of internal investigation, Nissan said it was planned to remove Mr Ghosn from his position as chairman when the board met on Thursday. The Standard & Poor rating agency warned that it could downgrade the company over the scandal.

Nissan’s profitability could “deteriorate significantly” in the fiscal years 2018 and 2019 if it was found that Ghosn’s alleged misunderstanding had made sales or the company’s alliance with Renault and Mitsubishi, S & P said in a statement.

Mr. Ghosn began sweeping changes at Nissan, which started in 1999, and created a work arrangement between Nissan and Renault, which enabled them to act as a single car manufacturer. In 2016, the agreement included Mitsubishi and all three shared costs for developing models and collaborating in their supply chain. In 2017 the alliance for the sale of 10.6 million cars stood.

Mr. Ghosn’s rapid decline prompted questions about the stability of the alliance and the individual car processors.

The outlook is particularly worrying in France, where Renault has over 47,000 workers.

Renault has 43 percent of Nissan shares and Nissan shares 15 percent of Renault – the same size as the French government. As one of Japan’s best-selling car processors, Nissan’s scale and economic performance make the heavy partner in the alliance.

Emmanuel Macron, President of France, facing political challenges at home and losing opinion bills, can not afford to see Renault trip. He called on Monday for the Alliance to hold together and say that the state would be “very vigilant” about its future.

France’s influential CFE-CGC union said it was worried about Renault’s future and demanded that “all actions would be taken to preserve the interests of the Renault Group and alliance.”

In Japan, Mitsubishi announced that it planned to implement An internal investigation as to whether Ghosn might have also “committed maladministration” there by similarly reporting his remuneration.

Mr. Le Maire said that the French authorities had not found any suspicion in Ghosn’s activities in that country. “There is nothing special about reporting Ghana’s tax situation in France,” he said. But he added that if Nissan’s allegations in Japan were true, “it would be of great importance.”

“Hidden and tax evasion is particularly worrying when you have an influential position and a very high salary,” he said.

A possible replacement for Ghosn on Renault can be Thierry Bolloré, the automaker’s chief operator. In an internal memo to employees on Monday, he expressed “full support” for Ghosn, saying that management would defend Renault’s interests.

Neither Nissan nor Mitsubishi signaled any successors. But Standard & Poors says in its note that rebuilding of Nissan’s management structure can be a challenge.

“While Nissan said it aims to identify its governance problems and prevent prevention, we believe the reconstruction of its management culture will not be easy quickly,” said the rating agency.

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