Carlos Ghosn, the man with a rockstar like reputation, was arrested in Japan on charges of fudging. How the mighty has fallen!
For a couple of decades Carlos Ghosn was an automobile Czar who enjoyed cult status. He built a formidable reputation for pulling the French auto major Renault from dire straits, succeeded in turning around Nissan Motors of Japan as also Mitsubishi Motors. He created an impressive combination of Renault-Nissan-Mitsubishi and built them as a powerful force, meeting competition from General Motors, Ford and Toyota. Ghosn achieved handsome economies by synthesizing the operations of the three famous auto manufacturers, optimizing and complementing their strengths.
Nissan commenced operations in India in the 1980s. In collaboration with Hyderabad Allwyn, it started producing light commercial vehicles. In the era of licences and permits, it did not make much of a mark, but in the new millennium, the Renault-Nissan combine set up a large manufacturing facility at Oragadam near Chennai that turned out both Renault and Nissan brand cars in large numbers. It has been enjoying sizeable exports.
When the ‘Kwid’ kid took Alto and Santro head-on
In grand style, Ghosn launched Renault’s small compact car Kwid in 2015. Kwid, designed for Indian conditions by Japanese, Italian, Korean and Indian scientists, began with a whopping 97 per cent indigenous content. The frugal engineering enabled Renault to offer Kwid at less than Rs 300,000, and it met with quick success. The Datsun RediGO brand, Nissan’s counterpart small car, launched a few months later, also gained popularity. Maruti Suzuki and Hyundai had their first taste of fierce competition in the small car segment they dominated.
Ghosn was among the highest paid executives: an estimated $ 8.5 million by Renault, $ 6.5 million by Nissan and $ 2 million by Mitsubishi, totaling $ 17 million, was his annual pay (around Rs 125 crore). His arrest over charges of financial violations has, therefore, come as a rude shock.
In our May 2018 issue, we reported on Renault-Nissan taking Tamil Nadu for a ride. We asked: you too Ghosn? The company had taken advantage of the humongous concessions offered by Tamil Nadu like nil sales tax for 14 years and 1 per cent tax on components procured from within the state and guaranteed power from the grid. While the tax concession was intended for cars sold in the Tamil Nadu, Renault-Nissan sold the entire production to its own entities and claimed sales tax concession for its total sales in India ! Ingenious.
Ghosn reminded one of another auto legend, Lee Iacocca, who turned around Chrysler Motors. Ghosn, who should have retired shining brightly as a lodestar, like Iacocca, appears to be falling like a meteor. – SV
The CARma of Carlos
It happened with Al Capone. It happened with Bill Clinton. Even in fables, it happened with Achilles (and his heel). In all cases, influential, strong figures got toppled by the smallest of mistakes and the openings it provided to take action.
Carlos Ghosn, the leader of the Renault-Nissan-Mitsubishi alliance, is the latest casualty. In an amazing series of events, Ghosn was arrested in Japan for under-reporting his income and misusing company assets. The swift, but severe action, impacted stock prices in all three companies, rattled France (where the government owns 15 per cent of Renault) and shook up partners peers and the press. Japanese prosecutors are supposed to have a nearly 100 per cent conviction rate – primarily by focusing not on charges that are the most egregious but on the ones easiest to prove. This likely explains why such a high profile leader with global connections was so quickly arrested for seemingly minor accusations.
Pay information for such executives are reported publicly, and there are hordes of experts who help executives file statements, reports and taxes. So, that begs the question on what was under-reported. As for the company assets’ misuse charges, not much has been said, and just a few speculative ideas have been floated. So, what is not being reported (there is even a rumour about an internal coup) will be more valuable than what we know so far.
Ghosn was a legend in the automobile industry. His bold moves to fiscally resuscitate Nissan through massive cost cutting while simultaneously ideating new products earned him both praise and scorn. In a culture where humility is cherished and ethics are supremely valued, this case presents a challenge for the Japanese.
We will have to wait and see if Ghosn will drive away with minor scratches or be totaled.
– Bala Swaminathan
