Saturday , July 24 2021

Why is the Carlos Ghosn scandal important for improper practice in Nissan?

LONDON, (CNN) – This person is the force behind one of the main forces in the automotive industry, an alliance with three separating companies, employs more than 470,000 people, operates 122 factories and, during 2017, sold 10.6 million vehicles.

And now Carlos Ghosn is in serious trouble.

The auto industry was shaken on Monday when Nissan said an internal investigation showed evidence that Ghosn lied about his income and misused company assets. Nissan shares fell 5.85% to $ 16.90 per share at the close of the session.

Lee: Nissan President Carlos Ghosn was arrested for "violations"

With 40 years of experience in the automotive industry, Ghosn is not an ordinary executive.

In addition to his position at Nissan, where he became CEO until last year, Carlos Ghosn is president of Mitsubishi Motors. He is currently the CEO and President of the French Renault automotive.

The three companies have more in common than the president; they also share ownership interests.

So, while selling to different customers under different brands and on two continents, the trio of producers work the key way as a single entity.

Many top executives from the alliance report to three different CEOs. Important decisions from all members of the alliance regarding products and investments are made only with the agreement of the other two partners.

Ghosn has the power behind the alliance. It took what had become three second-tier producers and united them in one strength, with joint sales equivalent to Volkswagen, Toyota and General Motors.

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Among the three: Renault, Nissan and Mitsubishi make one in every nine cars sold worldwide.

The most successful alliance in the industry

Over the years there have been other alliances in the automotive industry, but no one has succeeded well or made it back to its different parts so close. Ghosn shows the industry that partnerships can work and generate billions in savings.

The story began 19 years ago with the union of Renault and Nissan. France has 43.5% of Nissan's shares, while Japan has 15% of Renault. Mitsubishi joined in 2016, when Nissan bought 34% of its shares.

At a press conference on Monday night (Japanese time), Nissan CEO Hiroto Saikawa said he was confident that cooperation between alliance partners would continue even though Nissan was trying to overthrow Ghosn.

He said he believed that it was possible for three partners to approve a president as a replacement.

Lee: Nissan-Mitsubishi: an alliance to bring down Toyota and VW

"I can't say that the impact is zero," Saikawa said through an interpreter. "However, we will do our best (to minimize the impact). This alliance will not be affected by this event by itself."

The automotive industry needs to invest tens of billions of dollars to develop electric and autonomous vehicles – before technology companies reach them. Other manufacturers, such as Ford and Volkswagen, are in talks for a new alliance.

Rebecca Lindland, senior analyst at Cox Automotive, said the magnitude of the challenges facing the automotive industry meant that the alliance created by Ghosn would survive. But the business will not be as usual.

"(Business) is not separate. But there will definitely be interruptions," he said.

The alliance has planned life after Carlos Ghosn, who hopes to retire as Renault's CEO in 2022. Lindland said an accelerated search for his successor would cause disruption in the top rankings.

"There may be many people whose jobs have not changed," he said. "But there will be some executive consequences. Every time there's a disturbance at the top, it's very sudden, it must cause a bit of chaos."

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Mitsubishi said its board of directors proposed removing Ghosn "quickly" from its position, and Renault said its council would meet "soon."

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