It took two decades for “le cost-cutter” Carlos Ghosn to carve out his three-way automobile empire. But in a matter of days, it was ripped from his grasp.
Exactly a year ago, prosecutors waited for Ghosn as he arrived at Tokyo’s Haneda Airport in a private jet. The Nissan Motor Co. chairman was immediately arrested and taken into custody on charges that he underreported his income and used company funds for personal gain. He was ousted from Nissan three days later.
Alliance partner Mitsubishi Motors Corp. rapidly followed suit, and he eventually stepped down from his positions at Renault SA as well.
The downfall of the once-formidable Ghosn — who achieved near-rock star status in the industry for bringing the Yokohama-based carmaker back from the verge of bankruptcy — was as rapid as it was shocking. The ruthless cost-cutter, known for his ability to turn failing companies around, was eventually indicted on four charges and spent over 100 days in detention. He denies the charges and is now out on bail awaiting a trial that isn’t likely to begin until at least next spring.
Immediately after his arrest, various narratives emerged about the fallen car mogul as the scandal gripped the nation and the global business community.
Some posited Ghosn was targeted because he is a foreign national; others conjectured his ousting was a conspiracy involving the government to protect a storied Japanese company from completely falling into the foreign hands of Renault. Ghosn’s case also highlighted issues with Japan’s criminal justice system after he was repeatedly denied bail and interrogated without the presence of an attorney.
But a year on, how do these narratives hold up? Let’s take a closer look at the details behind Ghosn’s downfall.
Ghosn’s repeated arrests and rejected requests to post bail put the nation’s criminal justice system under global scrutiny once again.
Ghosn had to spend 108 days in detention before being granted bail in March. A month later, though, he found himself back in the Tokyo Detention House after being arrested on a fourth charge.
His close associate Greg Kelly was also arrested and indicted on charges that he conspired with Ghosn in the alleged financial wrongdoing. Kelly also denied all charges but was released much earlier.
Lawyers and activists denounced the process, homing in on Ghosn’s prolonged detention and interrogations conducted without the presence of his attorneys, both standard practices in what critics call Japan’s “hostage justice” system.
They also blasted the new plea bargain system and Japan’s notorious 99.9 percent conviction rate, surmising that prosecutors have more influence than defense attorneys, possibly undermining the chances of a fair trial.
American and French media initially rushed to defend Ghosn. Some, like Fox Business Network’s Dagen McDowell, claimed “Carlos Ghosn and his family are targets because they’re gaijin. They’re non-Japanese.”
Ghosn’s defense team alleged in October that he was “arbitrarily and discriminatorily” charged while the authorities ignored “admitted misconduct by Japanese executives of Nissan,” without providing evidence.
Tokyo prosecutors said Ghosn shouldn’t be granted bail because he was a flight risk and could tamper with evidence.
In the end, however, the Tokyo District Court approved his conditional release, which lasted until his fourth arrest — an act that caught many off guard and infuriated both his family and legal team.
Nevertheless, Ghosn’s case certainly re-invigorated advocates of criminal justice reform. Junichiro Hironaka, who earned the nickname “Razor” for his success in winning not-guilty verdicts for clients in high-profile cases, is one of the defense attorneys representing Ghosn. In October, he described the charges as “the biggest politically motivated investigation” in the country.
Ghosn’s legal team also recruited renowned French human rights lawyer and former diplomat Francois Zimeray, seeking to sway public opinion in Ghosn’s favor. Zimeray and other lawyers appealed to the U.N. body in charge of human rights, claiming prosecutors broke international law with their treatment of Ghosn.
The court battle could take years.
Turnaround artist falters
In the eyes of many, Ghosn’s rise and fall resembled a TV crime drama, culminating in the peculiar disguise he wore to escape media attention after being released on bail for the first time.
Known as a ruthless cost-cutter during his time at tire maker Michelin, Ghosn joined Nissan in 1999 as chief operating officer and was entrusted with the mission of rescuing it from collapse.
At the time, Nissan had posted a net loss of about ¥600 billion and accrued more than ¥2 trillion in debt. Ghosn immediately tightened the firm’s purse strings and launched a restructuring strategy known as Nissan Revival Plans. This painful move slashed the automaker’s workforce by 20,000 people and shuttered five plants.
“I wasn’t putting out a plan I didn’t believe in fully,” Ghosn recalled in his column in the Nikkei financial daily in 2017. “I asked for trust and backed it up by saying that if we did not return to profit after a year, I would resign, as would my executive committee.”
His gamble bore fruit. By March 2001, Nissan logged a net profit of ¥300 billion and paid off all its debt two years later. Eventually, Nissan opened 15 more factories worldwide and doubled its workforce to 245,000. Ghosn was promoted to chief executive officer in 2001.
His management style was the dose of shock therapy Nissan desperately needed to survive, corporate leaders acknowledged. He was hailed as a hero and savior, achieving celebrity status beyond the world of automobiles partly due to his charisma.
Internally, however, a different story was unfolding, according to a report by a special committee on Nissan’s corporate governance released in March. Ghosn’s arrest, in essence, exposed its festering fragility.
Ghosn’s massive sway over the firm and a lack of oversight was at the heart of the problem, the report said. He and a handful of close confidants had enormous power over executive compensation, personnel affairs and performance targets.
This “top-down” approach, according to the probe, created a corporate culture where “no one can make any objections or say ‘no’ to the performance targets.”
An alliance in disarray
During this time, a power struggle was developing in the Renault-Nissan-Mitsubishi alliance.
When Ghosn arrived in 1999, he was Renault’s executive vice president. In exchange for bailing out Nissan, Renault obtained a 36.8 percent stake. The French automaker now has a 43.4 percent stake with voting rights, while Nissan has a much smaller stake in Renault that is void of voting rights.
Ghosn and his defense team alleged that Nissan feared he would further integrate the companies, jeopardizing Nissan’s autonomy. Its executives, they claimed, solicited help from prosecutors and the government in a bid to kick him out of the company.
“You may think this is extreme, but Mr. Ghosn’s arrest is extreme,” Hironaka told reporters last month when he was asked whether a conspiracy against Ghosn seemed outrageous.
After the initial arrest in November, Nissan and Mitsubishi Motors immediately fired Ghosn.
Renault stayed patient at first but eventually severed ties with him after alleging to French authorities that Ghosn misappropriated its money for his wedding party at the Palace of Versailles. Renault identified some €11 million in questionable expenses attributed to Ghosn.
How Nissan and Renault will sort through the alliance in the post-Ghosn era remains unclear. Earlier this year, Renault reportedly proposed a merger, which Nissan declined out of fear it would end its independence.
Renault also briefly sought to merge with Fiat Chrysler Automobiles NV, throwing cold water on Nissan. Its failed pursuit of the Italian American automaker put Renault in an awkward position in Nissan’s eyes.
Fiat Chrysler announced it will merge with PSA Group last month.
The coup that wasn’t?
It wasn’t just Ghosn and Kelly who were driven out of their jobs.
When Ghosn was arrested, observers raised the possibility that Nissan’s then-CEO Hiroto Saikawa had orchestrated a coup to seize control.
If that was Saikawa’s ultimate ambition, it backfired.
Vowing to restructure the company, Saikawa sought to increase transparency at Nissan and refocus its sales strategy — to no avail.
Nissan’s bottom line continued to sag and in July, it reported an astonishing 99 percent drop in first-quarter operating profit. It then announced that 12,500 jobs would be slashed by March 2023.
The scandal tarnished Saikawa’s credibility. He was among a handful of executives that were part of a separate internal probe last year that led to the downfall of Ghosn and Kelly.
While he denied any knowledge of the pair’s alleged misconduct prior to the probe, Saikawa’s explanation was met with suspicion. After rebuffing demands for his immediate resignation, saying he would decide after fulfilling his duty to turn the company around, he caved to mounting pressure in September amid a financial scandal of his own, parting ways with the company after 42 years.
He was forced to exit after media reported he had received tens of millions of yen in extra payments in 2013 via what was known as a stock appreciation rights program. The remuneration program was linked to equity and run by Nissan. Directors were eligible to receive a bonus linked to increases in its share price.
This summer, Kelly accused Saikawa of exploiting the program by bending the rules to earn himself ¥47 million ($443,000) in 2013.
Nissan named Makoto Uchida, head of its joint venture in China, as Saikawa’s successor. Uchida will be working with new Chief Operating Officer Ashwani Gupta.
In Europe, Renault removed Thierry Bollore as CEO last month. Bollore, who replaced Ghosn in January, was seen as his close ally and as an obstacle to repairing the French automaker’s fractured relationship with Nissan.
Clotilde Delbos, the interim CEO, said Renault will reconsider the strategy Ghosn laid out to guide the automaker to 2022.
As the court drama involving the carmakers and their fallen boss unfolds next year, expect more intriguing details to emerge both inside and outside the courtroom.
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