Global auto industry leaders are vanishing from sight, just when their companies need visionary bosses to avoid becoming roadkill as the electric and self-driving car revolutions hit.
On Monday, Carlos Ghosn faced almost certain dismissal as chairman of Nissan after the auto giant accused him of “significant” financial misconduct, including allegedly understating his compensation for years. As the scandal unfolds, he may also lose his positions as CEO of France’s Renault and chairman of Mitsubishi of Japan.
The shock reports of his arrest and impending removal, which sent the shares of Renault and Nissan plummeting, came four months after the death of Sergio Marchionne, the Italian-Canadian CEO of Fiat Chrysler Automobiles (FCA). Mr. Marchionne had saved both Fiat and Chrysler from certain destruction and was preparing the trans-Atlantic group for survival as the industry gears up to spend hundreds of billions of dollars on new technologies.
Not long before, the upper ranks of Germany’s auto makers, including Volkswagen and Audi, were thinned out by the never-ending diesel-emissions scandal. In April, Ola Kallenius is to replace Dieter Zetsche as CEO of Daimler, owner of Mercedes-Benz; Mr. Zetsche is under pressure from investigations in the United States and Germany over possible irregularities on diesel-emissions testing results.
Mr. Ghosn and Mr. Marchionne were two of the most successful, imaginative, charismatic and hard-driving operators in the auto business. Both men believed that the route to success required consolidation that would allow car makers to save costs and achieve synergies by, for instance, launching an array of models off common platforms.
Mr. Marchionne brought Fiat and Chrysler together and turned Jeep into a global brand. At the same time, he employed financial wizardry, including the phenomenally successful spinoff of Ferrari, which now trades on the New York Stock Exchange, to keep the whole show rolling and ever more profitable. Shortly before his death, FCA reported greater profits than mighty General Motors.
Mr. Ghosn, who is 64 and of Brazilian and Lebanese descent, has had an even more remarkable career as an auto company Mr. Fix-It. He joined Nissan in 1999, saved it from bankruptcy and returned it to profit. In later years, he used cross holdings to build an alliance among Renault, Nissan and Mitsubishi. That alliance would grow ever closer, allowing the trio of companies to operate effectively as a single entity, with all the attendant synergies.
Mr. Ghosn recently oversaw a big investment in AvtoVaz, the Russian car maker that owned the failing Lada brand. Renault’s US$2-billion investment in AvtoVaz has revived the company and turned the lowly Lada into Russia’s top car brand. AvtoVaz reported a profit in the first half of this year, its first since 2011.
The massive cost savings allowed Mr. Ghosn to take an early lead in electric cars. Renault’s battery-powered models, including the two-seater Twizy and the small Zoe sedan, plus small trucks, account for one in every four electric vehicles sold in Europe. While Tesla nabbed the electric-car headlines, Renault was reporting strong sales.
It’s hard to see Mr. Ghosn surviving the accusations against him. Nissan revealed that it has been investigating him and another director, Greg Kelly, for months after receiving a whistleblower’s report. In a statement, Nissan said that both men had understated their income on financial statements – the word “alleged” was absent, suggesting that the company had little doubt about its accusations. “In regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed,” Nissan said.
Tokyo prosecutors searched Nissan’s headquarters on Monday in Yokohama and the Japanese press said that Mr. Ghosn had agreed to speak to prosecutors, apparently about undisclosed compensation. Mr. Ghosn was one of the industry’s highest-paid executives. According to Bloomberg, he made about US$17-million in the latest financial period. Among the biggest automakers, only GM’s Mary Barra earned more.
Mr. Ghosn was known to be ruthless as a manager and no doubt made more than a few enemies as he banged together his global vision of three automakers – four if you include AvtoVaz – operating as one. Was someone out to get him? And was Mr. Ghosn more vulnerable to scrutiny because he seemed to be losing his magic touch in the last year or so? Indeed, Renault was on the wane even before his arrest. Including Monday’s 10-per-cent fall, the shares have lost 32 per cent in the last year. Nissan has also had a losing year.
Still, the Nissan-Renault-Mitsubishi alliance can be regarded as big success, which raised the question: Will it fall apart with its inspiration and driving force missing in action?
There is little doubt that the glue of the alliance relied in good part on the sheer force of Mr. Ghosn’s personality. “He built his reputation as the man who turned around first Renault, then Nissan,” Ana Nicholls, analyst at the Economist Intelligence Unit, said in a note. “This helped to maintain the trust between the two companies as their fortunes wax and wane, usually in a way that balanced each other out.”
Ms. Nicholls concluded that the entire alliance faces a questionable future, noting that “his successor will face questions about whether to invest money increasing the company’s cross-shareholdings in order to cement the relationship, or risk the alliance falling apart.” French President Emmanuel Macron is also worried (the French state owns 15 per cent of Renault). “The French government will remain extremely vigilant regarding the stability of the alliance,” he told reporters in Brussels.
The auto industry is facing upheaval like never before as the traditional car makers are buffeted by companies such as Tesla and Uber – which threaten sales – and demands from governments everywhere for less congestion and cleaner air. How Renault-Nissan-Mitsubishi and FCA will meet these challenges without the CEOs who essentially created them is an open question.
Eric Reguly