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The big winner from Carlos Ghosn’s arrest? His protege at Nissan

by Matthew Campbell, Lisa Du, Ma Jie and Kae Inoue

Bloomberg

Long before the downfall of his mentor Carlos Ghosn, Nissan Motor Co. Chief Executive Officer Hiroto Saikawa had pushed to win more power for the Japanese carmaker in its strained alliance with Renault SA. Now he has a chance to do just that.

Saikawa, 65, has emerged as the main winner from Nissan Chairman Ghosn’s shock arrest on Nov. 19 for suspected financial offenses, putting him in a position to re-balance what he and others at the Japanese company view as an increasingly lopsided partnership. Exactly how that might occur is unclear, but the idea of an outright merger between Renault and Nissan — a deal that Ghosn had advocated for over opposition from Saikawa and others — is almost certainly dead.

“It’s a coup. Ghosn’s era is over,” said Tatsuo Yoshida, an analyst at Sawakami Asset Management and a former Nissan employee. “Saikawa is in a position to represent anti-Ghosn sentiment that’s been building up for years within Nissan.”

A Nissan lifer who was elevated to CEO when Ghosn stepped back from the role last year, Saikawa has a reputation as a fierce defender of Nissan’s interests within its dealings with Renault. The companies have been partners for almost 20 years, held together by a complex web of cross-shareholdings and joint manufacturing platforms — but most of all by Ghosn, a charismatic globetrotter who, until last week, was often cited as the most successful foreign executive in Japanese history.

But from virtually the moment Ghosn was taken into custody by Japanese police last week, Saikawa moved rapidly to show he was in control. Saikawa appeared alone at a late-night news conference just hours after the arrest, skipping the deep bow of apology that’s customary when Japanese companies admit wrongdoing. Instead, he issued a frontal condemnation of Ghosn’s alleged behavior, calling it “the dark side of Ghosn’s long reign” and lamenting that “so much power was concentrated in the hands of one individual.”

Decisive moves

Under Saikawa, Nissan has moved much more decisively against Ghosn than Renault, where Ghosn served as both chairman and CEO.

Meeting Thursday night in Yokohama, the Japanese company’s board agreed unanimously to fire Ghosn from the chairman position, despite being urged by Renault’s leaders to wait for more information, according to people familiar with the situation.

Nissan’s rapid ejection of Ghosn has fueled questions about Saikawa’s role in his boss’s downfall. Asked directly at the Nov. 19 news conference if a “coup” was underway at Nissan, he replied: “That is not my understanding. I didn’t make such an explanation and think you should not think of it that way.”

In the run-up to the board meeting, some directors were concerned they didn’t have enough information about what Ghosn is alleged to have done, people familiar with the matter told Bloomberg. Saikawa briefed some board members Wednesday on the allegations, according to people familiar with those exchanges, who asked not to be identified relating private discussions.

Then, during Thursday’s board meeting, a Nissan official presented more details to directors, according to a person familiar with the matter. That was enough to convince the board, which includes two former Renault executives, to vote to oust Ghosn, the person said.

Saikawa has not yet fully consolidated power. Before Thursday’s board meeting, it was widely reported in the Japanese media that he would be made interim chairman. Instead, the board opted to set up a committee made of independent directors to select the next chairman. While Saikawa will be a candidate, they may opt to split the role.

Ghosn, who has not been seen in public since his arrest, has reportedly denied the allegations. According to Tokyo prosecutors, he stands accused of underreporting his income and misusing company funds, although the details are unclear. Renault, which was kept in the dark about a monthslong investigation conducted by Nissan and the Japanese authorities, has demanded more information before taking action to dismiss him from his positions there.

Ghosn’s cosmopolitan background and jet-setting lifestyle — he’s a citizen of France, Brazil, and Lebanon, and in 2016 held a Marie Antoinette-themed wedding reception at the Palace of Versailles — contrast sharply with Saikawa’s biography.

The Japanese executive started at Nissan after graduating from the University of Tokyo in 1977. Much of Saikawa’s career was spent in the purchasing department, a critical function in any company but especially so for an automaker, since procurement can account for as much as two-thirds of the cost of sales. He has owned a Nissan Skyline crossover, speaks English and Japanese, and lives in central Tokyo. He’s married, but like most Japanese executives is discreet about his private life.

Complex alliance

Saikawa’s time at Nissan has included some complex ups and downs for the company. When the Nissan-Renault alliance was set up in 1999, Nissan was on the verge of bankruptcy, and Renault became its financial savior.

Those circumstances made Renault the alliance’s senior partner in governance terms, with a 43 percent voting stake in Nissan. In turn, it owns just 15 percent of its French counterpart, without voting rights. Saikawa has sought repeatedly to redress that imbalance, which has looked increasingly out of whack as Nissan’s financial performance outpaces Renault’s.

In 2015, he circulated a proposal that would reverse the partnership’s balance of power. That idea went nowhere, but Saikawa led negotiations on a compromise deal that resulted in milder concessions to Nissan.

Vital ally

Ghosn viewed Saikawa as a vital ally, and in 2017 promoted him to CEO, stepping back from Nissan’s day-to-day management in order to focus on leading Renault and the broader alliance. At the time, he called Saikawa “someone I’ve been grooming for many years.”

More recently, however, the two men appeared to grow apart. Saikawa emerged this year as an opponent of Ghosn’s merger ambitions, publicly playing down the chances of their realization in May. Those statements prompted a dressing-down from Ghosn, according to a person familiar with the matter, who told his colleague that he was jeopardizing Nissan’s credibility.

After Thursday’s board meeting, Saikawa told the press that stabilizing the current structure of the alliance is the best way forward, a sign that a full-fledged merger between the two companies is now unlikely.

The speed of Ghosn’s downfall, and Saikawa’s eagerness to draw a line under his career rather than stand by his longtime colleague, continues to drive conspiracy theories about his role in the events, especially among some Renault executives and their advisers.

Nissan said in a statement that it made the decision to contact Tokyo’s public prosecutor’s office after an internal investigation spanning several months. “We do not view our actions lightly, and believe they were fully necessary,” the company said.

Christopher Richter, an analyst at the brokerage CLSA Japan, said in an interview that the idea Ghosn was deliberately targeted by Saikawa and others remains “speculation.” But the optics of the situation do point in that direction, he said — and Saikawa’s treatment of his former mentor calls to mind one of the best-known assassinations of literature.

“Listening to his talk about too much power being concentrated on the hands of one man, I thought I was listening to Brutus in Julius Caesar,” Richter said.