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Nissan shares decline after Ghosn is arrested over alleged economic misconduct

TOKYO (Reuters) – Nissan Motor Cos shares dropped more than 6 percent on Tuesday as President Carlos Ghosn's arrest a…

TOKYO (Reuters) – Nissan Motor Cos shares dropped more than 6 percent on Tuesday as President Carlos Ghosn’s arrest a day earlier sent shock waves through business and doubted the future of Japan’s No.2 automaker and its global alliance.

Nissan said on Monday that an internal investigation triggered by a whistleblower’s tip-off had shown Ghosn committed himself to injuries including personal use of corporate money and under-reporting this year how much he earned. He was arrested and would be fired from Nissan’s board this week, said it.

Ghosn is also chairman and chief executive of Nissan’s French partner, Renault, and chairman of Japan’s Mitsubishi Motors Corp., third partner in the alliance.

Ousting Ghosn will ask questions about an alliance that he personally shaped and promised to consolidate with a deeper commitment, before finally returning from his operational leadership.

It also focuses on the future of Nissan &#821

1; the largest collaborative partner in the alliance – while seeing falling gains due to weak sales in the US and facing increased competition from competitors that invest heavily in new growth areas like internet-connected cars and self-propelled vehicles .

Ghosn’s alleged irregularities also provide questions about the board of the alliance where the three partner boards are chaired by a single executive director.

At a news conference last night, Nissan CEO Hiroto Saikawa reminded that too much power had been concentrated on Ghosn and that the consequences of his management of both Renault and Nissan had been without doubt since 2005.

Prosecutors said in a statement that Ghosn and Chief Executive Officer Greg Kelly collaborated to underestimate Ghosn’s reimbursement for five years starting in the 2010 financial year to be about half of the actual 9,998 billion yen ($ 88.9 million).

Ghosn joined Nissan in 1999 and became his CEO in 2001. He remained in that post until last year and had received $ 9.2 million ($ 10.53 million) in salary for the last year as CEO.

PHIL PHOTO: Carlos Ghosn, Chairman and CEO of Renault-Nissan-Mitsubishi Alliance, answers a question about the Alliance’s new venture capital fund under the roundabout of 2018 CES in Las Vegas, Nevada, USA, January 9, 2018. REUTERS / Steve Marcus / File Photo

“By underreporting his company salary, he basically deprived Nissan shareholders of the ability to assess the amount of his salary appropriate”, Toru Ibayashi, Managing Director of Wealth Management at UBS Securities Japan, said about Nissan’s claims.


Japanese public broadcaster NHK reported that Nissan paid billions of yen for home purchase and refurbishment for Ghosn in Rio de Janeiro, Beirut, Paris and Amsterdam, referring to named sources.

The properties had no commercial purpose and were not listed as benefits in filing to the Tokyo Stock Exchange, NHK said. CEO Saikawa declined on Monday to discuss details about Ghosns personal use of corporate money.

Nissan spent 2 billion yen at home for Ghosn in Rio and Beirut via a Dutch subsidiary, with Kelly overseeing the transaction, reported the Nikkei newspaper, referring to named sources.

There is no comment from Ghosn or Kelly about the allegations and Reuters could not contact them for comments.

In a sign of the broader political fallout, Hitoshi Kawaguchi, Nissan’s leading vice president of government relations, met Japan’s supreme government spokesman on Tuesday. He told the media that he had requested good relations between Japan and France.

The Asahi newspaper quoted named sources saying that a company employee gave prosecutors information about Ghosn in exchange for easier treatment, the other instance of an agreement in Japan – a system was introduced in June.

The Nissan shares fell to a two-year low of 940 yen and later traded by 5 percent to 955 yen.

The Nissan logo is seen on top of Nissan Motor Co.’s global headquarters building in Yokohama, Japan, November 19, 2018. REUTERS / Issei Kato

Shares of Mitsubishi, also said on Monday, would remove Ghosn as its chairman , slipped by about 6 percent. Renault shares lost 8.4 percent on Monday.

Ghosn’s fall would unlikely lead to a sharp drop in car sales, which reduced the disadvantages of Nissan shares, “said Fujio Ando, ​​advisor at Chibagin Securities.

“The fact that the case came about because of a whistleblower is also positive in terms of corporate governance. If it had become apparent by third parties, it would have been another story, he said.

Reporting of Chang-Ran Kim and Sam Nussey; Further Reporting by Hideyuki Sano, Ayai Tomisawa and William Mallard; Editing Stephen Coates and Muralikumar Anantharaman

Our Standards: Thomson Reuters Trust Principles.

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