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Nissan's Ghosn crisis

Chaos from Ghosn's fall ripples beyond Renault-Nissan alliance

Suppliers and French government worry as automakers lose clear captain

Carlos Ghosn was the glue that held the Renault-Nissan-Mitsubishi alliance together.   © Reuters

TOKYO -- The removal of Carlos Ghosn as chairman of Nissan Motor reveals deep tensions inside the Japanese automaker's alliance with Renault and Mitsubishi Motors, as the partners struggle to chart a future without the charismatic leader who held them all together.

The alliance's future hinges on finding a successor who possesses the leadership chops to navigate the trio's sometimes conflicting interests while ensuring continued growth amid paradigm shifts like autonomous cars and electric vehicles.

Nissan's board on Thursday voted to remove Ghosn, who remains held by prosecutors for investigation over allegations of understating his pay in the automaker's financial statements. Ghosn remains Renault's chairman and CEO, at least for now. And as head of Renault, Ghosn had commanded control over the alliance.

Renault apparently wanted to name Ghosn's replacement at Nissan. But the Japanese company sent a letter to Renault before Thursday's board meeting saying such a move would not be permitted, since Ghosn remains a director and the French automaker therefore is not entitled to more representation on Nissan's board, The Wall Street Journal reported.

Nissan initially considered appointing CEO Hiroto Saikawa as interim chairman, but put off the decision Thursday. The company's three outside directors will pick a candidate to succeed Ghosn from the board by December, though it is unlikely that someone from Renault will be chosen.

The three automakers collectively sell more than 10 million vehicles yearly, making their grouping one of the largest globally. But cracks in their alliance are showing elsewhere as well.

The three partners have called off a strategy meeting set for Monday in the Chinese city of Wuhan. Ghosn, Saikawa and other executives were expected to attend. Nissan holds the largest share of any Japanese automaker in China, the world's largest auto market where 28.87 million new vehicles were sold in 2017. But with China's market expected to contract in 2018 for the first time in 28 years, management saw a need for countermeasures.

Meanwhile, a Nissan factory south of Tokyo in Yokosuka, Kanagawa Prefecture, had been set to host Japanese and foreign parts makers this week for an explanation of future production and development plans. Ghosn was scheduled to speak on the alliance's medium-term strategy. But the event was postponed after his arrest Monday by Tokyo prosecutors.

The meeting, crucial for parts makers as they plan for investments such as production equipment, has yet to be rescheduled.

Customer traffic at dealerships reportedly has not slowed since Ghosn's arrest. Nissan continues to advertise as usual on television and elsewhere, with exceptions.

"I hope they give corporate governance a solid overhaul," a representative at a Tokyo-area dealership said. "With this and the problem of improper checks of finished vehicles, customers might start avoiding Nissan cars."

The upheaval in the alliance affects not just the wider auto industry. The French government, Renault's largest shareholder, does not want the arrangement to tip too far in Nissan's favor under a new leader and pull jobs away from France.

Renault alone employs over 40,000 people in its home country. Paris wants to make the alliance "irreversible," and Ghosn had responded to those hopes by increasing production of Nissan vehicles in France. On Nov. 8, he announced that a Renault plant in northern France will start producing Nissan and Mitsubishi vans.

To keep the alliance in its present form, Renault could try to place somebody as sympathetic to the French government as Nissan's new chair. The decision hangs on an upcoming shareholders meeting in which Ghosn and his aide Greg Kelly -- who also is under arrest -- are expected to be removed from Nissan's board.

The Dutch-based company that oversees the alliance is believed to have a rule that it must be led by the Renault CEO. This means Chief Operating Officer Thierry Bollore, who was temporarily put in charge of the automaker, could take control of the alliance if he is officially named chief executive.

But Nissan is increasing its influence within the alliance. The company pays massive dividends to Renault, which is its leading shareholder with a 43.4% stake, and has repeatedly requested a change in their capital relationship. A push for greater independence by the Japanese automaker could sap synergies in development and production -- the biggest fruit of the alliance made possible by Ghosn's leadership.

Ghosn saw strong market share as the key to success in the so-called CASE -- connected, autonomous, shared and electric -- vehicles of the future. He set an aggressive goal to boost alliance-wide sales beyond 14 million units by 2022, merge the trio's research and development operations and share 70% of their platform for electric cars.

The ousted Nissan chairman had taken the lead in a partnership with Google on connected cars, and with China's Didi Chuxing on car-hailing services. His absence could result in critical delays on such efforts.

Carlos Ghosn meets with then-Russian Prime Minister Vladimir Putin outside Moscow on Nov. 2, 2010. Ghosn's diplomatic ability was key to the alliance's growth in emerging economies.   © Reuters

Ghosn's diplomatic prowess also was instrumental in expanding the alliance's footprint in emerging economies, with his eyes on the 2020s and beyond. In Russia, Renault and Nissan said in 2012 that they would jointly acquire AvtoVAZ -- a response to a direct request from then-Prime Minister Vladimir Putin to Ghosn.

Ghosn formed partnerships between China's Dongfeng Motor Group and both Renault and Nissan, while also opening an alliance factory in India in 2010.

He regularly kept in touch with local partners and authorities in order to make these deals a reality. His influence over the three automakers also let him spread out investment across different regions while mitigating risks by sharing suppliers and outsourcing production. And while Ghosn's focus on emerging economies sometimes came at the expense of sales in alliance members' home markets, he managed to balance the trio's differing interests and keep them growing.

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