org-logo-smallTHE ORG
ExploreBlog
Login

The Fall of Carlos Ghosn

Christian Wylonis · November 25, 2018

Carlos Ghosn was recently ousted as the Chairman of Nissan following a scandal involving concealing millions of dollars in personal income and using company assets for his own benefit. Why would a successful business person like Ghosn risk his career to save a few tax dollars? Some commentators have suggested an internal mutiny by Nissan executives nervous over how much power he had accumulated.

Ghosn, a titan of the car industry, is widely credited for leading the merger of Renault, Nissan, and Mitsubishi. He joined Renault in 1996 and became known as “Le Cost Killer” after leading a radical transformation of the then troubled French car-maker. Renault achieved profitability the following year.

In 1999, Renault and Nissan formed the Renault-Nissan alliance and Ghosn assumed the role of COO at Nissan to lead a new turnaround effort. The Nissan Revival Plan called for cutting 21,000 Nissan jobs (14% of total workforce), mostly in Japan; shutting five Japanese plants; reducing the number of suppliers and shareholdings; and auctioning off prized assets such as Nissan's aerospace unit. In the first year of the Nissan Revival Plan, Nissan's consolidated net profit after tax climbed to $2.7 billion for fiscal year 2000, from a consolidated net loss of $6.46 billion in the previous year

In 2005, Ghosn was named president and chief executive officer of Renault. When he assumed the CEO roles at both Renault and Nissan, Ghosn became the world's first person to run two companies on the Fortune Global 500 simultaneously. In 2016, Nissan completed the acquisition of a controlling stake in Mitsubishi and Ghosn took over as Chairman with a plan to lead a turnaround - again.

Ghosn is now sitting in a Japanese jail cell. He was detained by Tokyo prosecutors following an internal investigation at Nissan that the company said found "significant acts of misconduct" over many years. Prosecutors allege that he and another Nissan director, Greg Kelly, collaborated to understate Ghosn's income by about $44 million as well as failing to properly disclose homes that were provided for him by Nissan in four different countries. Japanese public broadcaster NHK reported that prosecutors suspect Ghosn may have pocketed money that was meant for other Nissan executives.

But there are suspicions about the timing of Ghosn's downfall, which came amid concerns about the future of the Renault-Nissan partnership. He is thought to have planned a full merger of the carmakers, something that some Nissan executives feared could see their company reduced to a junior partner. Greg Kelly defended his boss's compensation, saying it was discussed with other officials and paid out appropriately.

© 2018 Orgio, Inc.