Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • Munich Auto Show
    • Geneva Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Technology
    • Segment Analysis
    • Cars & Concepts
    • Supplier Spotlight
    • Europe By The Numbers
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress
    • ANE Rising Stars
    • ANE Eurostars
    • Meet the 2021 winners
    • Browse photos from the 2021 awards ceremony
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • HEXAGON: Plugging into data is the only way to make winning EVs
    • TUV Rheinland: Battery testing center for large battery packs and more
    • TUV Rheinland: Ideas, services and certifications for smart mobility
    • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Automotive News Europe
November 19, 2018 12:00 AM

Ghosn's legacy at risk from financial misconduct probe

Peter Sigal
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Ghosn began 2018 with a mandate to strengthen the alliance. That's now in doubt.

    PARIS -- Carlos Ghosn was set to end his career in a few years as a towering industry figure. But it seems that will no longer happen after his arrest in Japan on Monday on charges of financial misconduct and Nissan's statement that it will seek to oust him as chairman.

    Whatever the outcome of the allegations that Ghosn engaged in wrongdoing including personal use of company money and under-reporting for years how much he was earning, his leading role in the Renault-Nissan alliance he has led for nearly 20 years would seem to be irrevocably damaged.

    Ghosn, 64, gave up his role as CEO of Nissan last year and has said that he may step down as CEO of Renault before his four-year term ends in 2022. He began 2018 with a mandate to strengthen the alliance, to ensure it would last “after I’m gone,” and he has taken steps to create more cross-functional teams and decentralize decision-making. However, the future of that role has been thrown into doubt.

    Ghosn was newly arrived at Renault after a turbocharged career at the tiremaker Michelin when his boss at Renault, Louis Schweitzer, sent him to Japan in 1999 with a daunting task: Rescue Nissan from near-bankruptcy and justify Renault’s audacious $5 billion investment in the ailing company.

    Ghosn took charge at Nissan with the title of chief operating officer, and within two years, Nissan was profitable -- and Ghosn was made CEO, a post he would hold until 2017. Ghosn became a rock star executive, the subject of glowing profiles and business-school case studies in how to get disparate corporate and national cultures to work together.

    Under his watch, the Renault-Nissan-Mitsubishi alliance has become arguably the largest automaker in the world, with sales of more than 10.5 million vehicles in 2017. The Renault brand has become a solid top 3 seller in Europe, and now has global reach and ambitions -- and a hedge against slow growth in Europe. Rescue projects like Dacia, a Romanian state-owned brand, and AvtoVAZ, which makes the Lada brand in Russia, are now solid contributors to the bottom line.

    The overall alliance books billions in “synergies” -- cost savings from cross-company functions that it quantifies -- every year. However, the slow pace of integration, which Ghosn has portrayed as deliberate, has been a source of criticism, notably in electric vehicle platforms.

    After a multi-billion-dollar investment early in the decade, Renault is a leader in electric vehicles, though sales figures have not matched Ghosn’s predictions, and a host of competitors are about to enter the market. Backed by the muscle of the alliance, Renault says it is ready to compete in autonomous vehicles and mobility services; Ghosn has promised a robotaxi service by 2022.

    Multicultural background

    Ghosn was born in Brazil in 1954 to Lebanese parents. At age 6, he returned to Lebanon, where he received a Jesuit education before enrolling in the prestigious Polytechnic University in Paris to study mathematics. Ghosn completed his education at the School of Mines in Paris, like the Polytechnic, one of France’s “Grandes Ecoles,” where leaders in business, government and science are trained.

    Ghosn had intended to pursue graduate studies in economics, but he was persuaded to enter the business world by an executive at Michelin, which was seeking, in Ghosn’s words, “a Brazilian engineer with a French education to work in Rio de Janeiro.” He started in 1978 in Michelin’s rigorous management training program, where he asked to be assigned to production rather than research. Within three years he was promoted to manager of Michelin’s new plant in Puy, France; at the age of 27 he was the youngest member of the management team.

    In 1985, Ghosn was sent to Brazil, with a mandate to fix Michelin’s struggling operations there. Two years later, after a top-to-bottom reorganization, the division was profitable, and in 1989 CEO Francois Michelin sent Ghosn to a much bigger playing field: the United States. Ghosn arrived at a critical time, as Michelin had just bought a competitor, Uniroyal-Goodrich.

    It was there that Ghosn showed two of his managerial strengths, rigorous cost-cutting (he closed three factories) and the ability to blend diverse corporate cultures. It was also where he learned how to become an “American CEO” — competing directly with competitors and observing the U.S. auto market first hand. Bob Lutz, then president of Chrysler, made a deep impression on Ghosn with his forthright style.

    ‘Le Cost Killer’

    In 1996, at age 42, Ghosn was recruited by Renault as an executive vice president, and a potential heir apparent, to CEO Louis Schweitzer, as the automaker was transitioning from a state-controlled enterprise. In addition, Renault was facing heavy losses and had just pulled out of the North American market and sold American Motors — including Jeep — to Chrysler. A proposed merger with Volvo did not materialize.

    His first task at Renault was to reduce overall costs by a total of 20 billion francs, or about $4 billion at the time. As part of that plan, Renault closed its factory in Vilvoorde, Belgium — and Ghosn acquired his nickname, “Le Cost Killer.”

    Ghosn’s next proving ground was Nissan, which was struggling with annual deficits that had led to about $20 billion in automotive debt, and was nearing insolvency. Factories were underutilized, and market share had declined for decades. Ghosn had been an advocate for the merger; he had presented his Renault cost-cutting plan to Nissan directors; and further, he was Schweitzer’s lone choice for the job.

    He first had to navigate daunting cultural differences. Nonetheless, Ghosn described himself as “the perfect outsider — foreign to Japan, to its networks, to its conventions and to its prejudices.”

    Over several months, Ghosn and his managers — including about 30 Renault executives -- devised the Nissan Revival Plan, to take effect on April 1, 2000. The plan was hashed out by what he called cross-functional teams, in areas such as growth, purchasing, research and development, and manufacturing. The specifics of the plan included lowering purchasing costs by 20 percent; reducing the number of plants by three, and closing 10 percent of dealerships. He also divested Nissan of much of its holdings in affiliate companies, a system known as keiretsu. About 21,000 jobs, 14 percent of the workforce, were to be cut.

    The plan promised a return to profitability in the 2000 fiscal year, and a profit margin of 4.5 percent by 2002 — and Ghosn said he would quit if he did not reach those targets. In 2003, Nissan’s operating margin was 11.1 percent, at the top of the auto industry.

    Taking over at Renault

    As planned, Ghosn succeeded Schweitzer as CEO at Renault in 2005, and he simultaneously ran both Nissan and Renault for more than a decade. The ownership structure, in which Renault holds 43 percent of Nissan and Nissan 15 percent of Renault, has remained steady -- but a continual source of tension. That is partly due to the involvement of the French government’s 15 percent stake in Renault, which has also tamped investors’ enthusiasm for Renault stock, and also prevented a further merger with Nissan. For Nissan’s part, as the larger of the two principles, it has seen the alliance as somewhat one-sided despite the many synergies between the two companies.

    Ghosn surrendered the CEO post at Nissan to Hiroto Saikawa in February 2017. Until this week, he held chairmanships at Nissan, Renault and Mitsubishi, and at the Dutch-registered holding company that oversees combined alliance synergies.

    Under his stewardship at Renault, Dacia, a Communist-era Romanian automaker that Renault acquired in 1999, became Europe’s bargain-brand leader. Its models are the cornerstone of Renault’s Global Access Program, which sells low-cost cars in emerging and developing countries including Brazil, India and North Africa. In 2016, Renault consolidated the operations of AvtoVAZ in Russia, which makes Lada, at a low point in the volatile Russian market, and it has started showing a profit this year after a turnaround plan was implemented.

    In 2016, Renault became the second-best selling brand in Europe, after VW, and the group’s global sales in 2017 reached a high of 3.76 million, growing 8.5 percent to beat the market by more than six percentage points.

    There have been a few bumps in Ghosn’s road. In 2011, his longtime lieutenant Patrick Pelata left Renault after three executives were falsely accused of industrial espionage. Two years later, chief operating officer Carlos Tavares, now CEO of PSA Group, left after publicly expressing his desire to run his own car company. Ghosn has also clashed with the French government over issues of his pay, and the alliance’s corporate structure.

    Last year, he dismissed reports that the alliance was setting up a secret bonus compensation pool, saying that the plan had come, unsolicited, from an outside financial adviser.

    None of those events managed to seriously ding Ghosn’s armor -- though there were signs that his influence was waning -- and he appeared to be orchestrating his own departure, on his terms, as he neared the usual retirement age.

    “Leading takes a lot of stamina,” Ghosn said in an interview with consulting firm McKinsey in 2012. “I became CEO at 45, and I was working like a beast. You think, ‘So I work 15 or 16 hours a day; who cares?’ But you can’t do that when you are 60 or 65.”

    Earlier this year, Ghosn was appointed CEO at Renault for another four-year term, but he agreed to take 20 percent pay cut and focus more on strengthening the alliance for his eventual departure. Ghosn also passed day-to-day duties at Renault to Thierry Bollore, who was promoted to COO.

    He said in an interview with Automotive News Europe in October this year that he would complete his work to build up the alliance and create a succession plan “sooner rather than later,” and would not serve out his full term at Renault. “I personally am not worried that the alliance will survive after I leave,” he said.

    RECOMMENDED FOR YOU
    Punch CEO Guido Dumarey to speak at Automotive News Europe Congress
    Related Articles
    Ghosn scandal raises questions about Renault-Nissan alliance's future
    Questions swirl around Ghosn's property deals
    Questions swirl around Ghosn's property deals
    Recommended for You
    Guido Dumarey Punch
    Punch CEO Guido Dumarey to speak at Automotive News Europe Congress
    Polestar CEO Thomas Ingenlath 2022
    Polestar CEO Thomas Ingenlath to speak at Automotive News Europe Congress
    Maria Grazia Davino Stellantis 2020
    Stellantis Europe sales and marketing chief to speak at Automotive News Europe Congress
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • Advertise with us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Munich Auto Show
        • Geneva Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Technology
      • Segment Analysis
      • Cars & Concepts
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress
      • ANE Rising Stars
        • Meet the 2021 winners
      • ANE Eurostars
        • Browse photos from the 2021 awards ceremony
    • More
      • Publishing Partners
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • HEXAGON: Plugging into data is the only way to make winning EVs
        • TUV Rheinland: Battery testing center for large battery packs and more
        • TUV Rheinland: Ideas, services and certifications for smart mobility
        • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us