Howes: Pay, perks scandal ensnares Renault-Nissan CEO Ghosn
In the end, money appears to have gotten “Le Cost Killer” — how appropriate.
Nissan Motor Co. shocked the global auto industry Monday when it confirmed plans to oust its chairman, Carlos Ghosn, for financial misconduct connected to under-reporting his compensation to the Tokyo Stock Exchange and misusing company assets, alleged crimes that prompted his arrest by Japanese authorities.
"This is an act that cannot be tolerated by the company," Nissan CEO Hiroto Saikawa said at a news conference where he alleged that a representative director, Greg Kelly, masterminded the scheme with Ghosn. "Our experts judge that this gives enough reason for dismissal."
It’s a stunning fall for the iconic CEO, capping nearly a generation atop the Franco-Japanese alliance that proved far more durable and successful than it was expected to be at its launch in 1999. Whatever this portends for Ghosn's tenure at Renault SA or overseeing the combined companies, it’s likely this emerging scandal will close a long chapter on the auto industry’s most successful global tie-up.
Ghosn, 64, was expected to remain active until 2020 running the Eurasian group of Renault, Nissan and Mitsubishi Motor Corp., as well as controlling interest in Russia's OAO AvtoVAZ and a combined 3.1-percent stake in Germany's Daimler AG. If there's one example of a successful multi-national automaker with global reach, the alliance Ghosn assembled over the past generation would be it.
A ruthless corporate cost-cutter, he crafted a global powerhouse out of the nearly bankrupt Nissan and Renault, both then badly in need of restructuring. When former Renault CEO Louis Schweitzer was asked around 2000 whether he would have engineered the Nissan rescue without Ghosn to execute it, he offered a one-word answer: "No."
"Carlos has always, since I've known him, been a highly capable person of very high intelligence, but also extremely aware of his own capabilities and his own importance," retired General Motors Co. Vice Chairman Bob Lutz told CNBC. "That type of personality can slip into borderline behavior. No CEO is immune to CEO disease.
"Think about it: everywhere he goes, all three corporations, nothing but admiration and adulation and 'yes, Boss.' Over a while, they tend to believe they're above the rules and above the law, and they start misbehaving. It's surprising and disappointing. Let's not forget he's innocent until proven guilty."
Of course. But if Japanese prosecutors successfully prove their case, there's precisely zero chance Renault's board of directors would retain Ghosn as CEO. In a tersely worded statement, the French automaker's lead independent director and its board committee chairs said they "acknowledged the contents of Nissan's press release" and expressed their "dedication" to defending Renault's interest in the alliance.
Ghosn's troubles come amid an undeniable spike in misbehavior, some of it potentially criminal, in the upper reaches of the global auto industry. Volkswagen AG's well-documented diesel scandal is costing the German automaker billions in fines, sunk costs in discredited diesel-engine production and investigations into some of its highest-ranking executives, including former CEO Martin Winterkorn.
Nissan, Mitsubishi and Subaru Corp. are weathering separate emissions data-cheating scandals, evoking comparisons to VW's "Dieselgate" and the intense pressure from top executives on the engineering ranks to make fuel-economy performance look better than it actually is.
Fiat Chrysler Automobiles NV and the United Auto Workers are targets of a federal corruption investigation focused on auto executives funneling illegal payments from a training center to union executives to buy labor peace. The scandal so far has implicated former UAW President Dennis Williams, the late FCA CEO Sergio Marchionne and others.
Agents also are investigating whether UAW executives misspent member dues on personal luxuries and if labor leaders at GM and Ford Motor Co. received money or benefits through their tax-exempt nonprofits. During sentencing hearings last week, federal prosecutors referenced as many as five unindicted co-conspirators, including former UAW Vice President Norwood Jewell, who retired in January after his home was raided by investigators.
And it all comes as the industry is riding the longest continuing wave of prosperity since the 1960s. Executive pay and bonuses are rich, profit-sharing payouts to UAW hourly workers near all-time records and the dark, ominous days of 2008 and 2009 are becoming an arguably too-distant memory for an industry that remains cyclical and tied to economic swings.
For all of his success, Ghosn also represents an era steadily drawing to a close. When the Renault-Nissan tie-up became official almost 20 years ago, the transnational DaimlerChrysler AG was barely a year old, the old General Motors Corp. boasted the largest geographic footprint in the industry, and Ford's stable of premium luxury brands was rivaled only by Ferdinand Piëch's VW.
Big, complicated cultural conundrums were all the rage, their logic driven by scale that could reduce costs and fatten margins (even if they often didn't). Nimble, techy partnerships — increasingly considered the critical ingredients for success in the Auto 2.0 of mobility, autonomy and electrification — were not.
DaimlerChrysler is defunct, a cultural disaster that failed to deliver its promise. A new GM, its balance sheet cleansed by bankruptcy, is geographically smaller and more profitable. Partnerships with tech heavyweights and tightly focused start-ups drive today's mergers and acquisitions, not grand alliances.
With the notable exceptions of Marchionne's FCA and Ghosn's Renault-Nissan, most of those ill-fated mashups have been relegated to history, increasingly irrelevant to today's challenges. VW remains the industry's largest assemblage of brands, albeit one apparently determined to transform its diesel competence into electric-vehicle leadership.
Instead, acquisitions and buyouts today are more likely to geared toward filling a knowledge gap, to recruiting coders, to finding next-generation tech talent focused on mastering what the industry calls the human-machine interface.
"I think we're all surprised by this," said Carla Bailo, CEO of the Ann Arbor-based Center for Automotive Research and a global program director for Nissan's trucks and SUVs from 2006 to 2011. "There's right behavior and there's wrong behavior. Regardless of how long you've been at a company, you know right from wrong. Rules are rules."
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.