Nissan apologizes after executive misconduct hits stock price

The chairman and former CEO of Nissan is out after an investigation revealed he had underreported income to avoid paying taxes and used company funds for personal expenses.

Now Carlos Ghosn has been arrested by Japanese authorities, leaving a leadership vacuum at several major car manufacturers.

Ghosn stepped down as CEO of Nissan in 2016 after the company took a 34 percent stake in Mitsubishi Motors, where Ghosn also became chairman. Ghosn is also CEO and chairman of French carmaker Renault.

The shocking news puts at risk the carmakers’ alliance, which builds one out of every nine cars sold worldwide. All three companies have seen their stock price dip after the news broke.

Nissan tried to paint itself as a victim of Ghosn, saying the former CEO misused company funds.

It wrote in a statement:

Based on a whistleblower report, Nissan Motor Co., Ltd. has been conducting an internal investigation over the past several months regarding misconduct involving the company’s Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly.

The investigation showed that over many years, both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amounts, in order to reduce the disclosed amount of Ghosn’s compensation.

Also, with regard to Ghosn, 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.

Nissan has been providing information to the Japanese Public Prosecutors Office and has been fully cooperating with its investigation. Nissan will continue to do so.

Nissan also apologized to stakeholders who had been hurt by Ghosn’s misconduct.

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It continued:

Nissan deeply apologizes for causing great concern to its shareholders and stakeholders. Nissan will continue its work to identify governance and compliance issues, and to take appropriate measures.

Renault and Mitsubishi promised swift action to address Ghosn’s position at their respective companies.

CNN reported:

Shares in Renault, where Ghosn is chairman and CEO, closed down more than 8% in Paris. Renault said its board would convene "very shortly" to discuss Nissan's revelations.

French President Emmanuel Macron said the government, which owns 15% of Renault, was watching closely.

"The state, as a [Renault] shareholder, will be extremely vigilant regarding the stability of the alliance and the group," Macron said during a visit to Belgium.

[…] Ghosn is also chairman of Mitsubishi Motors. The Japanese company said it was proposing that its board "promptly" remove Ghosn from that position. Its shares fell about 7% in Tokyo on Tuesday morning.

Nissan’s CEO Hiroto Saikawa addressed the scandal in a news conference.

The San Diego Union-Tribune reported:

"I am not in a position to talk about the progress of the investigation itself, but as a result of the investigation, we heard that the arrests have been made of the two gentlemen," CEO Hiroto Saikawa told a news conference in the company headquarters in Yokohama.

Saikawa would said he would convene a meeting of the board on Thursday to remove Ghosn and Kelly.

Saikawa revealed his anger over this misconduct.

The San Diego Union-Tribune continued:

"The concentration of power in one individual," as well as Ghosn's "long reign" at the automaking conglomerate, impacted operations and could have been factors in allowing the misconduct to take place, he said.

"People who reported to Mr. Ghosn became limited in number," Saikawa said. As a result, instead of taking decisions based on a range of information and opinions, Ghosn "made decisions based on limited input in some cases."

Saikawa also reflected the apologetic tone of Nissan’s statement to the press. "It's very difficult to express this in words," he said, according to The San Diego Union-Tribune. "Beyond being sorry, I feel big disappointment and frustration and despair and indignation and resentment."

Renault has been slower to take action against Ghosn.

Reuters reported:

“Carlos Ghosn is no longer in a position where he is capable of leading Renault,” Finance Minister Bruno Le Maire told France Info radio.

“Nevertheless, we have not demanded the formal departure of Ghosn from the management board for a simple reason, which is that we do not have any proof and we follow due legal procedure,” added Le Maire.

The French government has a 15 percent stake in Renault, and Renault in turn has a 43.4 percent stake in Nissan.

Reuters continued:

Le Maire said he would contact his Japanese counterpart over the matter, and reiterated that France’s priority was to ensure the stability of the Renault company.

Le Maire added that Renault’s partnership with Nissan was in the interests of both France and Japan and of both companies.

“Renault has been weakened, which make it all the more necessary to act quickly,” said Le Maire.

Renault shares were down 2.8 percent in early session trading, with the stock having slumped 8.4 percent on Monday.

Leaders are already casting doubt on the future of the Nissan-Renault-Mitsubishi partnership.

Reuters reported:

The Renault, Nissan and Mitsubishi car alliance may be hard to manage without the unifying figure of chairman Carlos Ghosn, who is police custody in Japan facing financial misconduct allegations, Mitsubishi Motors CEO Osamu Masuko said on Tuesday.

“I don’t think there is anyone else on Earth like Ghosn who could run Renault, Nissan and Mitsubishi,” Masuko told reporters in Tokyo.

[…] “The immediate problem is that while we still have people at the top of two companies, there is no one at the third,” Masuko added, referring to Renault.

Bloomberg wrote:

“This alliance is quite heavily bound up in the personality that is Ghosn,” said Demian Flowers, an analyst at Commerzbank AG in London. “If you’re talking about driving integration among these companies, and even the hope of a full merger in the future, then I think those hopes just took a big step back.

How would you advise the carmakers to begin shoring up their reputations, PR Daily readers?

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