TOKYO -- When a new round of inspection scandals hit Nissan Motor this past July, exposing how emissions test data had been tampered with for years, the company's leadership bowed in apology at a news conference to address the problem.
Although he was briefed on the issue, Chairman Carlos Ghosn chose not to return to corporate headquarters in Yokohama and continued vacationing with family on an island in western Japan.
"He thought he bore no responsibility," a Nissan executive complained. "Just what company is he chairman of?"
This may have been a sign that the charismatic cost-cutter was losing his touch. Under his drastic reforms, the Japanese automaker pulled back from the brink of bankruptcy and flourished for nearly two decades.
But his long stint at the helm while simultaneously steering French partner Renault created fertile ground for governance issues and conflicts of interest, culminating in the alleged misreporting of compensation for which the chairman was arrested on Monday.
Born in Brazil's Porto Velho in 1954, Ghosn studied in France at Ecole Polytechnique and what is now Mines ParisTech. He joined European tire maker Michelin in 1978.
Serving as head of Michelin in Brazil and later North America, both in his 30s, Ghosn gained valuable experience in corporate restructuring as well as mergers and acquisitions.
In 1996, he was recruited to join Renault, where he became executive vice president and succeeded in turning the company around. And in 1999, Ghosn was dispatched to Nissan after the French and Japanese companies agreed to form a capital alliance.
Though he was not directly involved in the negotiations, the track record that earned him the nickname "Le Cost Killer" led then-Nissan President and CEO Yoshikazu Hanawa to put him in charge of the automaker's revitalization.
At Nissan, Ghosn engineered a remarkably fast turnaround of an automaker struggling under the weight of more than 2 trillion yen ($17.8 billion at current rates) in interest-bearing debt. True to his nickname, he started off with deep cost cuts. He even moved to dismantle the company's web of affiliated suppliers, then seen as a sacred cow in the Japanese auto industry. The move triggered a shakeout among major steelmakers that came to be called the "Ghosn shock."
Ghosn served as president and CEO of Nissan from the early 2000s to 2017.
But from Nissan's perspective, the flaws in his leadership have grown increasingly evident over the past 19 years. Now, he will not be at the helm when the company celebrates the alliance's 20th anniversary in 2019.
This is a critical moment for the cost-focused management style Ghosn implemented at Nissan, where he started as chief operating officer in 1999. July's scandal followed revelations last fall that unqualified workers had inspected finished vehicles. Earnings are slumping amid lackluster sales in the key markets of North America and Europe, with group operating profit projected to fall by 6% and net profit by 33% this fiscal year.
When shareholders demanded at a June general meeting that leadership take responsibility for the inspection scandals, Ghosn distanced himself from the problem and stressed President and CEO Hiroto Saikawa's role as the head of Nissan. After the meeting, the chairman departed early from an informal gathering with newly appointed board members.
Ghosn's double duty at the top of Nissan and Renault, of which he became chairman in 2009, has created problems as well. In recent years, he has made decisions at the Japanese automaker that have worked to the French partner's advantage.
Nissan moved production of its mainstay Micra compact from India to a French Renault factory, for example. And just this month, he announced during a plant visit by French President Emmanuel Macron that Nissan would build a new commercial vehicle at Renault facilities in France. The French government is Renault's largest shareholder.
On top of this, Ghosn's compensation has come in for growing criticism at Nissan. Since fiscal 2009, Nissan has paid him a total of 8.7 billion yen, or roughly $77 million. For seven consecutive years, he ranked among Japan's 10 highest-paid executives.
His fiscal 2014 compensation made news for topping 1 billion yen, a rarity in corporate Japan.
But shareholders expressed their contempt at the annual general meeting, noting that he was spending less time at Nissan after becoming head of Renault as well.
Asked on Monday about the fact that the internal investigation that uncovered the chairman's alleged misconduct was sparked by a whistleblower report, Saikawa denied the characterization of the probe as a coup.