INSUBCONTINENT EXCLUSIVE:
By Theo Leggett Daniele Palumbo Business correspondent Data journalist, TheIndianSubcontinent NewsImage copyrightGetty ImagesThe downfall
of Carlos Ghosn has sent shockwaves through the global car industry
Last week he was arrested on suspicion of financial misconduct and dismissed from his post as chairman of the Japanese car giant Nissan
His detention has thrown into doubt the future of the Alliance - a global carmaking group that includes Renault, Nissan and Mitsubishi
It has also exposed fractures in the very close relationship between Renault and Nissan1
The Alliance - three companies acting as a single entityThe Alliance was formed in 1999, when Renault rescued Nissan from the brink of
The French carmaker has a 43% stake in its Japanese partner, while Nissan has a 15% stake in Renault
In 2016, Mitsubishi was added to the mix
Damaged by scandal and struggling financially, it was effectively bailed out by Nissan, which acquired 34% of its shares
Today, although the three companies retain distinct identities, they act as a global car grouping
They develop and use common technologies, buy parts from the same suppliers, and are developing systems for building cars from common
Together they employ more than 450,000 people, and sell more than 10 million vehicles a year.Before this scandal erupted, Carlos Ghosn was
chairman of both Nissan and Mitsubishi, as well as being chairman and chief executive of Renault
He was and remains chairman and chief executive of the Alliance, which has its own board
Nissan has grown faster than its partnerAlthough the three Alliance companies already have very close links, Carlos Ghosn had plans to bring
them closer, and in particular to reinforce the already strong links between Renault and Nissan
The TheIndianSubcontinent understands that while this would have fallen short of a full merger, with both companies maintaining their
separate corporate identities, it might well have involved Renault taking a majority stake in its partner.This is believed to have caused
concern and resentment at Nissan - and looking at the graph below, it is easy to see why
When the partnership between the two was first established, they were building cars at a similar rate
Since then, Renault has nearly doubled its output, helped in part by the acquisition of the Russian manufacturer Avtovaz in 2014
But Nissan has grown even more quickly
It now makes nearly 6 million cars and light vans every year - roughly a third more than Renault
Last year it made a profit of $5.8bn, and accounted for a sizeable chunk of Renault's own earnings
So seen from that perspective, Nissan and its executives could be forgiven for asking why they risked losing status and influence within
the Alliance, despite providing the lion's share of production and profits.3
The Ghosn effectThat said, Carlos Ghosn can justifiably claim a great deal of credit for Nissan's current strength
When he joined the company in 1999, he already enjoyed the nickname "le Cost Killer" in France for his actions at Renault
He brought a similar ruthlessness to Nissan, closing factories, cutting jobs and transforming the way it operated
As the chart below shows it was an effective strategy
Operating profits soared and remained high until the financial crisis, when like other manufacturers Nissan saw its earnings plummet.Nissan
recovered from the crisis quickly but since then the road has been rockier
In recent years, its margins have been hit by declining sales, rising costs, and a quality control scandal in Japan
In the six months to the end of October, operating profit was down by a quarter compared to last year
So had Mr Ghosn already lost his Midas touch4
Mr Ghosn was well paid for his effortsNissan claims that Mr Ghosn had been systematically under-reporting his earnings to security
regulators and had been misusing company assets for personal benefit
Those allegations are being studied by prosecutors, while Mr Ghosn himself remains in custody
There are many colourful stories about what exactly he is alleged to have done circulating within the Japanese media, although there has
been no response so far from Mr Ghosn or his lawyers
But one thing we can be sure of is that, under-reported or not, he was earning plenty of money
Last year he was paid about $17m in salary, share options and bonuses.In fact there has been plenty of controversy about his pay packet in
the past, but mainly in France, where it has been the subject of an annual showdown with shareholders
Those shareholders include the French state, which voted against his latest package in June
Shares have been laggingIt hasn't been a great year for investors in the Alliance companies
Renault's stock did surge briefly in the early part of the year, first on reports of a possible merger with Nissan and then amid speculation
the French government could sell its stake to the Japanese manufacturer
But in recent weeks all three have been in the doldrums
That's partly to do with the state of the market globally
But it may also reflect uncertainty about the future of the Alliance - and Mr Ghosn's role in it - which was apparent well before the news
That news prompted steep falls in all three companies' stock
If the future was uncertain before, it is even more so now
