Carlos Ghosn is a celebrity in the automobile industry because of his company turnaround stories which almost seem like fairy tales. Carlos Ghosn is currently in the news for fleeing Japan, where he is facing four criminal charges. While he is currently a wanted fugitive, the story of how he made Nissan and Renault forces to be reckoned with is worthwhile.
The Renault and Nissan alliance
When Renault was suffering from chronic underperforming sales and Nissan was nearly bankrupt, Carlos Ghosn proposed an alliance between the two automaker giants, where Renault purchased a 36.8 % stake in Nissan. Carlos Ghosn was later appointed Chief Operating Officer (COO) of both Nissan and Renault. He laid out a three year revival plan for Nissan, which was in a consolidated debt of $ 20 billion. The Nissan revival plan, announced in 1999, promised a return to profitability in the year 2000 and a profit margin over 4.5% in the year 2002 along with a reduction in 50 % of the debt by 2002.
Carlos Ghosn also promised to resign from his position if his goals were not met. Once the plan was announced, Ghosn announced major changes at Nissan, which included downsizing, letting go of 21,000 employees, which accounted for 14 % of the total workforce, shutting down multiple manufacturing plants in Japan and auctioning the aerospace unit. Other industry experts laughed at the plan and Carlos Ghosn’s decision earned him the nickname ‘Le Cost Killer.’
Japan has a hierarchy of age and seniority based promotion. At the time, Nissan had a lifetime employment policy, leading to a complacency which came with the job. Carlos Ghosn changed the employment policy from being a guarantee to a goal which needed to be achieved. Carlos Ghosn also proposed the abolishment of the Keiretsu system which was undermining Nissan’s performance. Keiretsu is an old Japanese concept of cooperation and alliances. Companies form interlocking interests and take up shareholdings. It is an unofficial and an informal form of business alliance which had long held dominance over the Japanese economy. Ghosn’s proposal to abolish this system did not sit well with the Japanese public, caused outrage and earned him the name ‘Keiretsu Killer.’
Upon achieving his targets, Ghosn became an overnight hero in Japan, where outsiders, often referred to as ‘Gaijin,’ find it hard to gain recognition. He was even depicted as a superhero in a Japanese comic book.
After bringing Nissan from the brink of bankruptcy to the second best automobile maker in Japan behind Toyota, Ghosn announced his plan to unveil the Nissan Leaf in 2010. The Nissan Leaf was dubbed as the world’s first affordable zero emission car.
The Renault-Nissan alliance is the leader of the electric vehicle segment in the world, beating Elon Musk’s Tesla. As of 2017, the alliance sold double the number of cars as Tesla.
Arrest and downfall
By 2018, many in Japan and outside were of the opinion Ghosn’s income from both Renault and Nissan was too high. A whistleblower, who was a close aide of Carlos Ghosn, said they had information Carlos Ghosn was instructing his close aide and board member Greg Kelly to create two salary accounts for Ghosn. One account held money which would be paid every fiscal year to Ghosn and the other account would hold a pot which was designated to be paid out to Carlos Ghosn after his exit from Nissan. Nissan went to the authorities with this information and it was found Carlos Ghosn was under reporting his income filings. Following this, Carlos Ghosn was arrested at the Tokyo Airport.
Following the arrest, Ghosn was sent to a detention center and had no contact with anyone except his Japanese lawyer, the Lebanese embassy and the French embassy. He alleged he was mistreated as he is a foreigner.
Carlos Ghosn recently made headlines when he fled from Japan and went to Lebanon via Turkey. Lebanon currently has no extradition treaty with Japan in place, meaning Japan currently has no way to prosecute him. Carlos Ghosn made a statement that he would disclose everything to the media in the coming months.
Read about the rise of Carlos Ghosn here: Carlos Ghosn – The Rise Of A Titan Of Automobile Industry
