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The rise and fall of Carlos Ghosn

Updated 12 Dec, 2018 09:55am
What's next for the man dubbed Mr Fixit?

Carlos Ghosn, one of the most well-known names in the global automobile industry, was indicted by Japanese prosecutors for understating his pay yesterday (December 10, 2018), along with former Nissan director Greg Kelly. While the case against Ghosn had been building since as far back as November, the news still sent shock-waves across industry circles. How could a man whose genius had been credited with single-handedly saving some of the world’s most iconic carmakers have fallen so far and so fast? It was stuff straight out of a thriller.

Born in 1954 in Brazil to Maronite Christian parents from Lebanon, Ghosn had a meteoric rise spending his childhood and early years in all three countries that he has a nationality of: France, Brazil and Lebanon. He graduated from France’s Ecole Polytechnique in 1978 and commenced what was to be a prolific career. While he served in a number of leading positions, his star rose phenomenally when he was appointed Deputy CEO of France’s Renault Group to save the company from impending bankruptcy. Ghosn immediately got to work cutting costs, streamlining new models, pushing for more R&D investments, slashing redundancies and the workforce. His efforts paid off and Renault once again rose as one of Europe’s leading carmakers.

In the early 2000s, Renault sent across Ghosn to Japan to power a similar turnaround at its ailing Japanese partner Nissan Motors and here too, Ghosn did not disappoint. He implemented Renault work methods with a healthy dose of Japanese discipline, and this turned Nissan around, earning him the monikers “Le Cost Killer” and “Mr Fixit”. The French and Japanese governments, both heavily involved in the earlier ailing carmakers also encouraged Ghosn (along with the Boards of both companies) to take on a more prominent role as Chairman and CEO of the Renault-Nissan group.

But Ghosn wanted more than just process re-engineering to fuel Renault-Nissan’s growth. He went on an expanding spree, shutting down non-profitable markets andexpanding in other more promising ones. He brought new brands into the mix including Russia’s AvtoVAZ, relaunched Datsun and at the height of his success brought Mitsubishi Motors in a complex three-way alliance with Renault-Nissan that created the world’s third largest automobile group with a 10% share of the global market.

In industry circles, Ghosn was a god on wheels. His vision was hailed as the future of the automobile industry which would be driven by mergers and acquisitions coupled with innovation to drive the industry ahead. He was repeatedly voted amongst the world’s most trusted business visionaries and was subject to much admiration.

All that changed when news came out that Japanese authorities were investigating Ghosn for under reporting his income as well as for misuse of company assets around the world. Initially Ghosn denied any wrongdoing (he still maintains his innocence). Further investigations led to indictments of his close Aide Greg Kelly as well as Nissan Motors for aiding and abetting the crimes. The charges were astounding. Ghosn had allegedly not reported nearly $44 million of compensation over a period of five years (from 2010 to 2015) and another $27 million from 2015 onwards. Furthermore, it was revealed that Nissan had continued to pay for extravagant residences of Ghosn in multiple locations such as Beirut and Brazil. As investigators unearthed more details, news came out of further alleged impropriety including Nissan paying $100,000 annually to Ghosn’s sister as an advisory consultant without a clear role as well as paying for extravagant vacations for his family.

In industry circles, Ghosn was a god on wheels. His vision was hailed as the future of the automobile industry which would be driven by mergers and acquisitions coupled with innovation to drive the industry ahead. He was repeatedly voted amongst the world’s most trusted business visionaries and was subject to much admiration.

The matter came to a head on November 19, when in a shocking sequence of events, the man once dubbed the indispensable glue holding the tripartite Renault-Mitsubishi-Nissan Alliance together was arrested as his private jet landed at Tokyo’s Haneda International Airport.

As the trickle of news around the scandal became a flood of media and public interest, The Renault-Mitsubishi-Nissan Alliance went into damage control albeit in varying ways. Nissan, the most mired of the three companies by the scandal fired Ghosn first from his Chairman/CEO post on November 22. Four days later on the 26th, Mitsubishi followed suit. Conversely, Renault stood by Ghosn, retaining him as Chairman and only nominating an interim replacement after news of his arrest came through (dubbed euphemistically as Ghosn being “temporarily incapacitated”).

The matter, while still under investigation, has led to some heated discussions between the Japanese and French governments. Ghosn was the architect of the Renault and Nissan turnarounds, both projects that were pets of the country’s then Economy Minister, one Emmanuel Macron, now the president of France. Macron was not shy to highlight his concern for Ghosn’s well-being to his Japanese counterpart Prime Minister Shinzo Abe; even as both governments went to great lengths on the sidelines of the G20 Summit to reiterate support for the continuation and growth of the Renault-Mitsubishi-Nissan Alliance.

For his part, the man who saw it all come together is now facing an uncertain future, sitting in a Tokyo detention center with hardly any of the creature comforts that he was so used to from his venerated position of leadership of one of the largest automotive groups in the world.

While it is uncertain how things progress from here, Ghosn is prospectively looking at a grim future, considering Japan’s notoriously high conviction rate for white collar and industrial crime. Many feel he has been harshly targeted by the Japanese justice system more so because he is a foreigner and other scandals at companies like Toshiba and Olympus in recent years weren’t as zealously pursued or details leaked to the public as vigorously as in his case. Whatever the outcome may be, one thing is clear that Ghosn had the vision, the grit and the acumen to turnaround some very sick automotive giants back into profit. His creation of the Renault-Mitsubishi-Nissan Alliance is testament to the success of his vision, and while a guilty verdict may dent his stellar legacy, what he accomplished is something no judicial verdict can ever take away.