Nissan chairmans stunning fall from top of auto industry

A week ago, Carlos Ghosn was sitting atop one of the world’s most powerful auto empires as Nissan Chairman. Now, he’s sitting in a Tokyo jail cell.

The dramatic downfall of the iconic global business leader is a tale of bombshell allegations, corporate intrigue and simmering cultural tensions.

A 40-year auto industry veteran, Ghosn brought together three big carmakers — Renault (RNSDF) of France and Japan’s Nissan (NSANY) and Mitsubishi Motors (MMTOF) — with the aim of rivaling the top dogs: Volkswagen (VLKAF), Toyota (TM) and General Motors (GM).

His vision appeared to be working: Ghosn’s alliance makes one out of every nine cars sold around the world.

But its future has now been cast into doubt after he was arrested in Japan, ousted as chairman of Nissan and sidelined at Renault.

Mitsubishi is expected to fire him on Monday.

The Brazilian-born executive is accused of taking advantage of his position at the top of Nissan, which he ran for more than 15 years.

The allegations include concealing millions of dollars of personal income and using company assets for his own benefit.

As his reputation is trashed and the empire he built comes under strain, Ghosn is stuck in a Tokyo jail cell, facing the prospect of 10 years in prison if convicted. He’s yet to respond publicly to the allegations.

What has Ghosn allegedly done?

Ghosn was detained by Tokyo prosecutors on Monday when he reportedly stepped off a flight from Beirut, where he grew up.

His arrest followed an internal investigation at Nissan that the company said found “significant acts of misconduct” over many years, including understating his income in financial reports and misusing company assets.

Prosecutors allege that he and another Nissan director, Greg Kelly, collaborated to understate Ghosn’s income by about 5 billion yen ($44 million) over a five-year period ending in March 2015.

Japanese public broadcaster NHK reported that Ghosn also failed to properly disclose homes that were provided for him by Nissan in four different countries.

NHK added that prosecutors suspect Ghosn may have pocketed money that was meant for other Nissan executives.

Nissan, which hasn’t confirmed the details reported by NHK and other Japanese news outlets, has accused Kelly of being the “mastermind” behind the scheme.

How did we get here?

Ghosn was named Nissan CEO in 2001 and is credited with pulling off a stunning turnaround at the company, which was in financial trouble at the time.

Since then, he has engineered deeper integration between Nissan and Renault.

Mitsubishi joined the alliance in 2016 after Nissan bought a 34% stake in it.

Together, the three companies employ more than 470,000 people in nearly 200 countries.

But the partnership is unequal. Nissan, which is much bigger and sells more vehicles than Renault, holds only a 15% non-voting stake in the French company. Renault holds a much more powerful 43% shareholding in Nissan.

“In pure monetary terms, Renault has been getting a better deal than Nissan,” analysts at investment firm SC Capital wrote this week.

Some analysts suggest that this has stirred discontent among Nissan executives, who were also uncomfortable about the possibility of Renault and Ghosn seeking for a full-blown merger.

A number of analysts and commentators have suggested that Ghosn was the victim of a “palace coup” by Nissan executives nervous over how much power he had accumulated.

Asked about the coup speculation, a Nissan spokesman said that the company “believes strongly that the investigation revealed serious misconduct spanning multiple years” and that the actions it took against Ghosn were “fully necessary.”