Carlos Ghosn, the chairman of Nissan and one of the world’s most powerful automotive executives, has been arrested by Japanese prosecutors in a move that sent shockwaves through the industry.
The 64-year-old French-Brazilian is suspected of having understated his income on financial statements and was exposed by a whistleblower. Nissan said it will fire him this week as the company admitted it had left him in control for too long.
Ghosn is regarded as one of the leading figures in the global car industry, having forged an alliance between France’s Renault, Nissan and Mitsubishi that created the world’s second-largest car manufacturer. As well as chairing Nissan, Ghosn is chief executive and chairman of Renault and chairman of Mitsubishi.
In a statement, Nissan said that “over many years” Ghosn and another senior executive, Greg Kelly, had been “reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn’s compensation”.
Nissan added: “Numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.”
According to Japanese broadcaster NHK and the Kyodo News Service, Nissan paid Ghosn nearly 10 billion yen (£69m) over five years through to March 2015, including salary and other income from the company, but reported as if he only made 5 billion yen, or half of what he had received.
The Asahi newspaper reported that prosecutors had searched the offices of Nissan’s headquarters and other locations on Monday evening.
Hiroto Saikawa, the chief executive and only remaining survivor of the firm’s top three executives, will propose to the board that Ghosn and Kelly be dismissed, citing “clear violations of the duty of care as directors”.
Saikawa confirmed Ghosn and Kelly had been arrested, and apologised profusely to shareholders and employees for the chairman’s conduct. At the end of a 90-minute press conference Saikawa gave a bow of apology.
“Too much authority was given to one person in terms of governance,” he told reporters at Nissan’s headquarters in Yokohama.
“I have to say that this is a dark side of the Ghosn era which lasted for a long time.”
“Beyond being sorry I feel great disappointment, frustration, despair, indignation and resentment,” Saikawa said.
Renault’s market value dived, with shares falling by 8.4%. The value of Nissan shares listed in Germany fell by 6.4%.
The arrest caused consternation across the world, amid concerns that the Renault-Nissan-Mitsubishi alliance could break apart without the influence of Ghosn. French president Emmanuel Macron said his government, a major shareholder in Renault, “will be extremely vigilant to the stability of the alliance and the group”.
Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at tyre manufacturer Michelin in France, before moving on to Renault. He joined Nissan in 1999 after Renault bought a controlling stake and became its chief executive in 2001. Renault owns 43.4% of Nissan’s shares. Nissan, in turn, owns 15% of Renault and 34% of Mitsubishi Motors.
Ghosn was the key figure behind the alliance, which Mitsubishi joined in 2016, creating a top-four car firm through a series of interlinked shareholdings. The alliance, which sold 10.6m cars in 2017, has more than 450,000 employees worldwide including Britain’s biggest car factory, the Nissan plant in Sunderland. Ghosn had signed an extension to his contract at Nissan which would have carried him through until 2022.
In a statement, Renault’s lead independent director, Philippe Lagayette, affirmed his “dedication to the defence of Renault’s interest in the alliance”. The Renault board “will be convened very shortly”, he added.
Mitsubishi in a statement said it would propose Ghosn be dismissed as chairman “promptly”, with his sacking expected on Thursday.
Felipe Muñoz, a global automotive analyst at Jato, a research firm, said the arrest represented a crisis for the firms Ghosn headed, although he added that the alliance could survive.
“We could see some rivalry between Nissan and Renault to take control,” Muñoz said. “[Ghosn] was one of the most important figures in the industry. He was a rock star.”
Ghosn had also in recent months made his mark on British politics, making outspoken comments on the effects of a hard Brexit on Nissan’s Sunderland site. Ghosn was also personally involved in acquiring assurances from prime minister Theresa May that the car manufacturing sector would not be harmed in the aftermath of the Brexit vote in 2016.
Officials at Unite, the union which represents workers at the Sunderland plant, are understood to be monitoring the situation.
Kelly, the other arrested executive, was a representative director at Nissan. A US citizen who trained as a lawyer, Kelly joined Nissan’s North American arm in 1988, including in human resources roles. He was described as the mastermind behind the alleged misconduct by Saikawa.
Nissan said it was cooperating with Japanese prosecutors.
Nissan’s statement said: “Nissan deeply apologises for causing great concern to our shareholders and stakeholders. We will continue our work to identify our governance and compliance issues, and to take appropriate measures.”