Mitsubishi Sides With Nissan in Merger Backlash, Ghosn Claims He Was Set Up

Depending who you ask, the November arrest of disgraced auto executive Carlos Ghosn was either swift justice or a coup d’etat — with some help from the Japanese government. Re-arrested in December and held ever since without bail, Ghosn faces breach of trust charges alleging the exec covered losses incurred through foreign exchanges with Nissan’s funds between 2008 and 2012. Those losses add up to $16.6 million, according to the prosecution. He’s also cited for misrepresenting his income.

However, Ghosn doesn’t see things that way. On Wednesday, he told the Nikkei business daily that he believed the charges against him were motivated by Nissan executives opposed to further integration with its French alliance partner, Renault SA. “All the evidence is with Nissan and Nissan forbids all employees to talk to me,” he elaborated.

Whether or not his claim is accurate, Alliance automakers are picking sides. Mitsubishi, the Alliance’s junior partner, is siding with Nissan. Its CEO, Osamu Masuko, said converting the Japanese pair into a holding company with alliance partner Renault is not something that should be on the table — especially with the scandal hanging over their heads.

“I don’t even consider it as one of the options,” the Mitsubishi chief on Friday. “I think it would be difficult to have management on an equal footing under such a structure.”

However, according to Automotive News, Masuko said he hadn’t directly heard about any plan for a holding company. “[Nissan CEO Hiroto] Saikawa personally heard about it, but I wasn’t told about the idea of a holding company myself. I didn’t hear about it at all and thus haven’t given any consideration to it,” he said. “I need to consider if that would be acceptable to our employees … I wonder if it would be possible to ensure a spirit of equal partnership and management on an equal footing.”

Despite always backpedalling when Saikawa and Nissan expressed their collective dismay, Ghosn has pushed to solidify the Alliance for years. While he rarely calls for an official merger, it has long been assumed that this was his pre-retirement goal. Renault holds a 43.4 percent controlling stake in Nissan, while Nissan has a 15 percent stake in Renault, but no voting rights. It also has a 34 percent stake in Mitsubishi. Renault and Mitsubishi have no cross-holdings.

The lack of Japanese independence is a major sticking point for Nissan. But there have also been growing tensions between Alliance leadership. Under Saikawa, Nissan found itself the subject of a highly publicized quality control scandal (which began decades before he took over) in Japan, as well as dwindling sales in the United States. The CEO claimed the volume issue was the direct result of aggressive incentive spending encouraged by Ghosn’s ambitious sales targets. But Ghosn placed most of the onus on Nissan.

“When a company’s performance declines, no CEO is immune to being dismissed,” he told the French press from his Tokyo detention centre, hinting that he planned to fire Saikawa before his initial arrest.

Bloomberg highlighted several tense moments between the two men in a recent article, claiming Saikawa’s repeated public statements that no good could come from a Renault-Nissan merger resulted in Ghosn angrily telling him he had damaged the company’s credibility, and his own, by openly questioning the plan.

From Bloomberg:

He also suggested to Saikawa that his days as CEO could be numbered. The conversation wasn’t an isolated incident — the same source says Ghosn had criticized Saikawa for weak performance in the U.S., where Nissan is badly lagging rivals. And at one point, according to a person close to Ghosn’s family, he told his children Saikawa had only until the end of 2018 to turn things around. (In its statement, Nissan said suggestions that Ghosn and Saikawa were divided, whether over the inspections crisis, a potential merger, or Nissan’s performance, are based on “unsubstantiated speculation and hearsay,” and that claims Saikawa’s job was at risk are “baseless.”)

Ghosn enjoyed a significant advantage in both pay and power. He was still Nissan’s chairman, in addition to being Renault’s CEO and chair, and chair of the Amsterdam-based entity that oversees the alliance. Under a structure that’s changed little since the 1999 rescue, Renault also controlled 43 percent of Nissan’s shares, giving it the power to veto major decisions. Regardless of Saikawa’s position, Ghosn could probably make deeper integration happen.

However, he’s in jail now and Renault recently replaced him with new chairman Jean-Dominique Senard. He’s in no position to make business deals, and that’s precisely where Nissan wants him. In fact, it was an investigation initiated by the Japanese automaker that ultimately led to his arrest.

Last spring, some of Ghosn’s affairs shifted from his American lawyer, Greg Kelly, (who was also arrested and later released) to Malaysian-born attorney Hari Nada. The three were reportedly friends, though Nada eventually grew concerned that Ghosn abetted some illicit financial transactions and sought help from those he deemed trustworthy within the company — kicking off the investigation. He eventually learned that Nissan’s auditors were already looking into Ghosn. Ultimately, the two groups joined forces without ever notifying Renault of the investigation.

Ghosn has denied all allegations against him. But he has confirmed the plan to integrate the alliance partners, including Mitsubishi, and said the matter was discussed with Saikawa shortly before his arrest.

“Nissan’s performance has declined in the last two years,” he said. “If you look at the results and the strengths of Nissan, Mitsubishi and Renault, you can see that there is a problem. I did not expect what happened, but all this led to treason, conspiracy.”