First part of a three-part series taken from our interview with Carlos Ghosn.
Carlos Ghosn’s legacy at Nissan will forever be mired in controversy because of how it ended: starting with his removal from his plane and his arrest when he arrived in Tokyo in November 2018, through his daring year-end escape the following year when he determined he couldn’t get a fair trial in Japan and would likely spend most of the rest of his life in a Japanese prison.
We’ll likely never know the full truth about his arrest and why a small faction within the automaker turned to the Tokyo prosecutor’s office to essentially resolve a dispute at the board of directors over Ghosn’s compensation – or what happened during his 130 days of incarceration at the infamous Tokyo House of Detention. where he was subjected to prolonged interrogations in the absence of his lawyer and without being informed of the charges against him, two violations of Japanese law.
Prosecutors intended to break him down, get him to confess to a series of alleged financial crimes. But authorities have not treated all members of Nissan’s board of directors alike, targeting two foreigners and no Japanese: Ghosn and American Greg Kelly, an ally of Ghosn currently on trial in Japan for allegedly the Ghosn’s accomplice. There will always be questions about the final judgment if he had stayed in Japan to be tried.
Ghosn, a French, Brazilian and Lebanese national who arrived in Japan in 1999 to restructure and revive Nissan, has claimed his innocence from the start. Recently leaked documents from the Kelly trial, which Nissan and prosecutors have had in their possession since the day of Ghosn’s arrest when Nissan attorneys raided Ghosn’s Beirut office and took his computer, support his claims. affirmations.
“There have been proposals,” he told Wards. “It was a post-retirement package that was neither decided nor defined. He would have gone to the board after my retirement and proposed by the representative directors to keep (me) fully linked to the company to use (my) concerns in the long term and prevent me from working for other organizations. There was a lot of brainstorming. But nothing was done in the end.
According to the original billing documents, the total amount would have totaled 9.3 billion yen, which, based on average annual exchange rates, amounts to $ 94 million. That’s a lot of money until it is considered to be compensation that Ghosn agreed to forgo in 2010 when he accepted a pay cut to help Nissan bounce back from the business slowdown and the yen’s hyper-strength following the bankruptcy of Lehman Brothers Holdings in 2008.
Yes, he was partly motivated by the new executive compensation disclosure guidelines and complained about being underpaid, but he says the Japanese public “wouldn’t understand” his 1.8 billion yen salary ( $ 16.4 million at current exchange).
“I thought the Japanese public wouldn’t understand my pay,” he explains, “and internally I needed everyone to be motivated and aligned on our recovery. So I decided voluntarily and without pressure to reduce my remuneration. And then let’s see what happens.
While a small faction in Nissan’s management group hired prosecutors to help them eliminate Ghosn on a future salary of 9.3 billion yen, they also managed to trigger a market capitalization loss of nearly 8 billion. dollars, the fall beginning the day after his arrest.
But Ghosn, now 68 years old and living in Lebanon, which does not have an extradition treaty with Japan, believes that the biggest loss is borne by the “Alliance” of Nissan, Renault and Mitsubishi which form one of the largest automotive groups in the world.
“The responsibility of this group of people inside Nissan (which staged a coup in the council chamber), the Tokyo prosecutor and the government of Japan for Nissan’s disappearance is enormous. And it’s not just Nissan, ”he says. “Look at Mitsubishi. Mitsubishi was in the middle of a recovery in 2017 and 2018. Look what happened to them in 2020. And look what happened to Renault.
Mitsubishi reported an operating loss of 95.3 billion yen ($ 868 million) in fiscal 2020. Renault’s deficit swelled to 2 billion euros ($ 2.4 billion), while Nissan’s operations were 150.7 billion yen ($ 1.4 billion) in the red. The combined operating losses of the three Alliance companies totaled $ 4.6 billion. Net after-tax losses reached $ 17 billion.
Ghosn compares the Alliance’s finances to those of Toyota and the Volkswagen Group, which respectively reported profits of 2.2 trillion yen ($ 20.5 billion) and 10.6 billion euros (12, $ 9 billion). Toyota’s operating profit margin stood at a respectable 8%. Volkswagen’s, although down from 2019, was 4.8%.
The future of Nissan and the Alliance?
“Three years ago,” says Ghosn, “we had three companies on the cusp of industry leadership. We had Toyota, Volkswagen and the Alliance. We only have two now, and I don’t think the Alliance is going to come back (at the highest level), especially with the kind of mindset and leadership they have.
“Obviously people in the Alliance are talking to me. I know what’s going on. They tell me what is not happening like before, that there is no more vision, that there is no more vision on technology and products, that they are focusing on the short term.
When Ghosn arrived at Nissan in June 1999, first as COO and then 12 months later as CEO, Nissan was on track to report a loss of 684 billion yen (6.3 billion dollars) that year. The Japanese fiscal year begins in April.
Five years later, Nissan was on track to make the biggest profit in its 71-year history, 512 billion yen ($ 4.7 billion), on record sales. He would do even better in fiscal 2005. And his debt had been reduced to almost zero.
Likewise, when Ghosn handed over management to Hiroto Saikawa in October 2016 – Saikawa initially sharing the duties of CEO, then becoming the sole CEO the following April as Ghosn assumed the positions of chairman of Nissan and Mitsubishi – Nissan was posting profit margins. operating rate of 6%, not as high as the pre-Lehman shock period, but solid.
Margins steadily declined over the next 24 months, starting in October 2016, and in the first trading quarter after Ghosn’s arrest, from January to March 2019, they fell to 0.2%.
“Nissan is effectively back to where it was when Carlos Ghosn arrived in 1999 to restructure and revitalize the organization,” said Koji Endo, senior automotive analyst at SBI Securities.
In fact, Nissan plans to lay off more than 10% of its global workforce, cut production capacity and cut its model range by 20%, and close at least two factories, in Spain and Indonesia. . Its combined net losses over the past two years stand at 1.1 trillion yen ($ 10.1 billion). And as a brand, it is no longer in the top 10 of global sales of battery electric vehicles.
The main difference between 1999 and today, according to one observer, is that the automaker doesn’t have Carlos Ghosn to lead the restructuring.
Does Ghosn think that at some point people will have a bird’s eye view of his accomplishments and history will end up looking at him sympathetically?
“Look at the results,” he says. “We are businessmen. How can you tell that I was not a good leader after looking at 18 years of results at Nissan? And how can you tell the guys (currently) who run the company are doing it right when you look at the results of the last two or three years? It is a disaster, not only at Nissan, but also at Renault and Mitsubishi.
Nissan declined to be interviewed for this report.