Carlos Ghosn has been the newsmaker this week and for all the wrong reasons.
Who would have thought that the most charismatic leader of the auto industry actually faces the possibility of spending time in jail? That the man who rescued Nissan will now feel that he has been done in by the same company?
The news of his arrest in Tokyo has sent shock waves through the world’s automotive ecosystem. Here was a powerful CEO who strode the stage like a colossus where everyone hung on eagerly to everything he said. He was Chairman of the Renault-Nissan-Mitsubishi alliance and had singularly sewn up this marriage thanks to his relentless drive and vision.
To this writer, who has met and interviewed Ghosn on a few occasions, his larger-than-life persona was intact at the recently held Paris Motor Show where he held forth on the Chinese market and, later, at a joint press conference with Daimler CEO, Dieter Zetsche, Ghosn dwelt at great length on Brexit, the opportunities with Daimler and a host of other issues.
Today, the same man stands indicted for financial irregularities at Nissan where he is due to be fired as Chairman. Mitsubishi is expected to follow suit with a similar sentence while Renault would perhaps be more circumspect. This is not the easiest of times for the three companies who have a common umbilical cord in the form of Ghosn. After all, it was he who formed the trinity with Mitsubishi being the latest addition in 2016. This was the time it had found itself in the midst of a mileage fudging scam and had its back to the wall. Ghosn moved in quickly and steered Nissan to picking up a 34 per cent controlling stake in its fellow Japanese automaker.
Nearly two decades earlier, it was the same Nissan which was gasping for survival and needed to be bailed out. This time around, it was Ghosn who took centre stage in working out a revival plan for the beleaguered automaker.
Renault and Nissan’s alliance has grown stronger over the years even while the crossholding of equity (Renault’s 43 per cent to Nissan’s 15) does seem lopsided in favour of the French company. There have been talks of a merger happening which may not be music to Nissan’s ears, considering that it is the stronger of the two today but Renault still has more leeway in terms of voting rights and so on.
There is no question that Ghosn has been playing the balancing act in this drama where the French government is also involved. As in the case of Groupe PSA (which makes the Peugeot and Citroen brands) where it has a 14 per cent stake, the government has 15 per cent in Renault. To that extent, Ghosn’s arrest could have political implications where Japan and France may need to walk a delicate tightrope if things get dicey.
Now, what could have prompted Nissan to act with such ruthlessness against its one-time icon and knight in shining armour? The good thing about justice in developed nations is that even the high and mighty are not spared. Yet, while nobody is arguing that Ghosn should be exonerated, there is clearly a deeper game being played.
In the following days, there will be a whole lot of other stakeholders who will be questioned, right from the auditors to the Nissan management. Did they know all along that there was something fishy and still turned a blind eye to it? Was there a deliberate attempt to upset the applecart and oust Ghosn who was just getting way too powerful?
The script is going to get murkier in the coming days as more skeletons begin tumbling out of the closet. Beyond this is the fate of the alliance itself. It is all very nice to suggest that the show will go on after Ghosn (assuming his guilt is proven and he is shown the door) but this is not as easy as it sounds.
At the end of the day, this was one man who had the vision, drive and determination to get the alliance moving. The kind of results achieved in cost synergies, joint manufacturing (India is a case in point), future mobility options and so on clearly had the Ghosn touch. Without him, it will be difficult for the partners to infuse the same levels of energy into this large system.
Further, it will be extremely hard to work on an edifice of mistrust and suspicion. On the French side, there could be resentment at the way the Japanese pulled off a coup against their own man which also explains why Renault is being more guarded in its reaction.
As for Nissan, it will now try its best to extract more from this partnership or even break away completely. This is easier said than done since there is an important stakeholder involved in the form of the French government which will not assent to such momentous decision making in a hurry.
At this point in time, Renault needs Nissan more than the other way around except that it will now need to give its Japanese ally a greater voice in terms of voting rights and so on. This is the only way a merger can be contemplated and pave the way for a smooth future.
Mitsubishi, in its turn, has indicated that it will sack Ghosn on the lines of what Nissan has proposed. Increasingly, there is a greater sense of consolidation happening within Japan’s automotive ecosystem as in the case of Toyota and Suzuki or Toyota and Mazda. Even Honda and Yamaha, which were bitter foes once, are teaming up for development of niche products.
The million-dollar question
In this backdrop, there will be a greater sense of bonding between Nissan and Mitsubishi, going forward. However, these are early days yet and a lot will depend on what is in store for Ghosn. Whether he is found guilty or not, the relationship between Renault and Nissan will never be the same again. Both partners will be far more wary of each other and whether this eventually leads to a divorce is the million-dollar question.
For now, this seems the unlikeliest thing to happen considering that there is just way too much at stake in terms of investments, joint projects, etc. India is one such instance where there is a sprawling plant along with an engineering and design centre. All this just cannot be unscrambled overnight, as the fallout will be near catastrophic.
Ghosn’s arrest has shown what it means to have too much reliance on a single person. Yet, there is no denying the fact that it was his dogged persistence and determination that paved the way for growth and embracing new opportunities.
As in the case of Sergio Marchionne, who was the face of Fiat Chrysler Automobiles and whose death earlier this year caused tremors, Ghosn is just in another leadership league. These are unique men who have made a huge difference to the companies they have been associated with and end up outgrowing their employers. They also become tough acts to follow and this is where Renault and Nissan will have their work cut out in a post-Ghosn era.