Ghosn Shock Puts Renault-Nissan Empire in Doubt

(Bloomberg Opinion) -- With a generation of big-name carmaker CEOs nearing retirement age, the issue of succession has been front and center of industry minds in recent months. Nobody expected it to be settled like this.

First came the shock death of Sergio Marchionne, who turned around Fiat before transforming Chrysler too. Now, Nissan Motor Co. has moved to oust Carlos Ghosn as its chairman after allegations about financial violations related to his compensation. Ghosn, also CEO of France’s Renault SA — and chair of the giant Renault-Nissan alliance — has been arrested, according to Japanese press reports.

The 13 percent slump in Renault’s share price on Monday shows how bad this looks for investors. Known as “Le Cost Killer” in France, Ghosn is the architect and guiding light of the complex Franco-Japanese industrial alliance and cross-shareholding structure that has generated billions of dollars of cost-savings and helped make Renault-Nissan one of the world’s biggest auto producers (Nissan picked up a 34 percent stake in Mitsubishi Motors Corp. in 2016).

There were hopes that the globe-trotting 64-year-old — a quintessential “Davos Man” — would lead the effort to simplify that structure and get rid of the “conglomerate discount” that depresses the alliance’s value. That’s probably not going to happen now. Instead, an unhappy period of introspection beckons.

Ghosn’s pay has always been a source of contention, and the fact that he spent most of his time crisscrossing continents on a corporate jet was no secret. It’s impossible to say of course whether Nissan’s claims are true until all the facts are known (Ghosn hasn’t commented), but it’s hard to imagine him remaining chairman there. It’s questionable too whether he can remain boss of Renault, a company he joined way back in 1996. Chief Operating Officer Thierry Bollore would be a natural successor. 

In recent years, the alliance had started to seem lopsided. Renault owns 43 percent of Nissan, whereas Nissan holds only 15 percent of Renault and yet contributes most of the alliance profits. That’s made simplifying the structure very difficult. Still, investors hoped Ghosn would try. Shareholders ascribe a negative value to Renault’s carmaking operation when you strip out the Nissan stake and make other adjustments, according to Bloomberg Intelligence analyst Michael Dean.

The French government, which owns  15 percent of Renault and thus has significant influence over both companies, will be watching events closely. So far France hasn’t shown much sign of wanting to reduce its Renault stake and this news won’t give it any incentive to reconsider.

At a time of unprecedented technical and regulatory upheaval in the car industry, carmakers need a sure hand on the tiller more than ever. Nissan has instead been landed with a scandal that will reverberate for months. 

—With assistance from David Fickling.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

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