Nissan's leaked email trail shows how Carlos Ghosn was taken down
Carlos Ghosn always said he was set up.
Now there’s some evidence to support his claim. According to people familiar with what happened and previously unreported internal correspondence, the campaign by top Nissan Motor executives to dethrone one of the most celebrated leaders in the automotive industry started almost a year before Ghosn’s arrest in late 2018 for alleged financial misconduct.
The effort was motivated in part by opposition to the former chairman’s push for greater integration between the Japanese carmaker and long-time alliance partner Renault SA, the new information reveals.
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While Nissan has long maintained that the decision to oust Ghosn turned on allegations of under-reporting his income and other financial transgressions leveled by Tokyo prosecutors, the documents and recollections of people familiar with what transpired show that a powerful group of insiders viewed his detention and prosecution as an opportunity to revamp the global automaker’s relationship with top shareholder Renault on terms more favourable to Nissan.
A chain of email correspondence dating back to February 2018, corroborated by people who asked not to be identified discussing sensitive information, paints a picture of a methodical campaign to remove a powerful executive. The information comes to light as another former Nissan executive and the company itself face a looming trial in Tokyo, and as Japan seeks the extradition of Ghosn, 66, who fled to Lebanon in a daring escape last year.
Alarmed by Ghosn’s pledge in early 2018 to make the alliance between the companies irreversible, senior managers at the Japanese automaker discussed their concern at how the chairman of both Nissan and Renault was taking steps toward further convergence, according to people familiar with discussions at the time.
‘Neutralize’ His Initiatives
At the centre of those discussions was Hari Nada, who ran Nissan’s chief executive’s office and later struck a cooperation agreement with prosecutors to testify against Ghosn. Nissan should act to “neutralise his initiatives before it’s too late," Nada wrote in mid-2018 to Hitoshi Kawaguchi, a senior manager at Nissan responsible for government relations, according to the correspondence.
Ghosn has said he’s innocent of the four charges of financial misconduct and breach of trust. Considered an international fugitive by Japan, Ghosn declined to comment via a representative for this story.
Lavanya Wadgaonkar, a spokeswoman for Nissan, also declined to comment for this story. Nada didn’t respond to an email and voicemail seeking comment, while Kawaguchi, who left Nissan in December, declined to comment, as did the Tokyo prosecutor’s office and a representative for Renault.
On Nov. 18, 2018, the day before Ghosn was seized on a private jet at Tokyo’s Haneda Airport, Nada circulated a memo to then-Chief Executive Officer Hiroto Saikawa, according to people familiar with the document. Nada called for termination of the agreement governing the alliance and the restoration of the Japanese company’s right to buy shares in Renault, or even take it over. Nissan also would seek to abolish the French automaker’s right to nominate Nissan’s chief operating officer or other more senior positions, people familiar with the memo said.
Ghosn’s removal would be a fundamental change to the world’s biggest car alliance, requiring new governance, Nada is said to have written in the document to Saikawa. Nada said Nissan should be quick to press its position after Ghosn’s arrest. Renault was kept in the dark about the criminal investigation, Bloomberg reported in January 2019.
The discord between the Japanese and French partners ultimately thwarted Renault’s 2019 bid for greater scale by combining with Fiat Chrysler Automobiles NV, and stymied cooperation over strategy and new models. Nissan’s management was in turmoil and profitability was shrinking, hurt by an aging lineup and high costs.
In May, Nissan reported a loss of 671 billion yen ($6.3 billion) for the fiscal year that ended in March, the first loss in a decade and the biggest in 20 years. With the coronavirus pandemic weighing on an already-sputtering business, the stock has erased more than half of its value since the arrest of Ghosn, who also led Renault and the alliance that includes Mitsubishi Motors Corp.
Communication from Nada to Saikawa and other senior executives showed deep concern about Ghosn’s plans to further integrate the alliance, which gives the French automaker greater sway over Nissan via a 43% stake. Renault had saved the Japanese manufacturer from bankruptcy with an emergency cash injection in 1999. That’s when the French automaker dispatched Ghosn to Nissan, who pulled off one of the most dramatic salvage jobs in auto industry history.
Yet, after two decades, with Ghosn dividing his time between the companies as CEO of Renault and chairman of the alliance, Nissan began to stumble.
Nada told CEO Saikawa in April 2018 that Ghosn was becoming increasingly agitated about Nissan’s performance and comments by his handpicked successor, who said he saw “no merit" in a merger between Renault and Nissan. “He can create a major disruption and you may become a victim of it," Nada wrote to Saikawa. The following month, Nissan issued a profit outlook well below analysts’ estimates.
Ghosn was charged in Japan with underreporting about $80 million in income and funneling money from Nissan without the automaker’s knowledge into entities that he controlled. Calling the Japanese legal system a sham, Ghosn escaped the country late last year by sneaking aboard a private jet inside an audio-equipment box, making his way to Lebanon via Turkey.
Two Americans who allegedly helped smuggle Ghosn out of Kansai International Airport, ex-Green Beret Michael Taylor and his son, Peter Taylor, were arrested outside Boston last month at the request of Japanese authorities. Japan’s government is taking steps to request their extradition, while the two have denied that any crimes were committed.
Former Nissan executive and board member Greg Kelly was arrested the same day as Ghosn and remains free on bail in Japan. He’s awaiting trial on charges that he helped the former chairman underreport his income. Prosecutors also charged Nissan in the first round of indictments.
Nissan’s position since the arrests has remained steadfast, with the company saying “the cause of this chain of events is the misconduct led by Ghosn and Kelly," for which it found “substantial and convincing evidence" after investigating a whistle-blower’s report. Both Ghosn and Kelly repeatedly denied those allegations.
Nada, a Malaysia-born lawyer who oversaw many of Ghosn’s affairs at Nissan and joined the automaker in the 1990s, led the internal probe and was implicated in some of the alleged conduct being investigated by the Tokyo prosecutor. At the same time, emails show how Nada worked to gather information, traveling to Brazil and Lebanon to investigate Ghosn’s use of company-provided homes.
Days before Ghosn’s arrest, Nada sought to broaden the allegations against Ghosn, telling Saikawa that Nissan should push for more serious breach-of-trust charges, according to correspondence at the time and people familiar with the discussions. There was concern that the initial allegations of underreporting compensation would be harder to explain to the public, the people said.
The effort should be “supported by media campaign for insurance of destroying CG reputation hard enough," Nada wrote, using Ghosn’s initials, as he had done several times in internal communications stretching back years.
When asked to comment for this story, Saikawa referred to his prior public statements rejecting the existence of a plot to oust Ghosn. “There was no effort to remove Renault’s influence" by removing Ghosn, Saikawa told reporters in January after the former chairman accused Nissan executives of conspiring against him during a news conference in Beirut. “There’s a huge difference between that and his crimes," Saikawa said then.
Saikawa stepped down as CEO in September after a Nissan investigation found he had been paid excess compensation. Nada, as well as other executives, also were overpaid, an internal probe found last year, people with knowledge of the matter have said.
As the date neared for the planned arrests of Ghosn and Kelly, preparations were made to assess how Renault’s board would react and how to respond if the French company were to assert its position.
Nissan should make it clear to Renault that the French automaker had no right to involve itself in the operations of its alliance partner, and that Nissan wasn’t obliged to offer positions within the company to candidates selected by Renault, Nada said, according to people familiar with the memo.
The contract binding the partnership, called RAMA, as well as a Netherlands-based entity called Renault-Nissan BV that was created to oversee its governance, should both be abolished as a result of Ghosn’s arrest, Nada asserted. That would give Nissan the right to acquire Renault shares in order to disenfranchise Renault or take it over, he is said to have written in the memo.
Source of Friction
The RAMA has long been a source of friction between Nissan and Renault. The French automaker can exercise full voting rights with its Nissan shareholding, while the Japanese carmaker holds only a 15% stake in Renault and lacks the ability to vote its shares. The agreement also limited Renault’s power over Nissan, cementing Ghosn’s role in keeping the partnership together. Moreover, the French state owns 15% of Renault with double voting rights, giving it indirect sway over the Japanese company.
The correspondence also for the first time gives more detail into how Nissan may have orchestrated Kelly’s arrest by bringing him to Japan from the U.S. for a board meeting.
“Greg wants to spend thanksgiving before coming to Japan," Nada wrote to Saikawa. Nada told Kelly that his attendance was urgent and that he would be able to return soon. “If he does not come, he will never come back. I am scheduling a jet to pick him up," Nada wrote.
Kelly’s lawyer, James Wareham, said the case against him was never about criminal activity. “Greg Kelly has been caught up an effort to remove Ghosn and get Renault out of a controlling position," Wareham said. “To consummate the scheme, they wanted a witness to be in their control under duress, and then they went so far as to break international extradition law to make that happen."
Months after the arrests, Nissan was able to secure changes to its partnership with Renault, but the new agreement — forged in March 2019 — didn’t alter the alliance as much as Nada had proposed. While Nissan won more say over executive appointments and eliminated Ghosn’s former post of alliance chairman, the shareholding structure remained intact. But the damage was done; the relationship was left in tatters.
Later that year, Nissan withheld its endorsement for Renault’s pursuit of a 50-50 merger with Fiat Chrysler, scuttling their bid to create an automaker potentially worth 35 billion euros ($39.4 billion). While there’s been a cease-fire of sorts since then, the lopsided shareholding structure remains unresolved. The companies announced measures aimed at closer operational integration last month, as they seek to weather the pandemic.
After Saikawa left last September, a new triumvirate was put in place to run Nissan, only to see one member, co-COO Jun Seki, resign soon after he lost out on the top job. CEO Makoto Uchida and COO Ashwani Gupta are now left to face the monumental task of turning around the maker of the Altima sedan and Rogue mid-size sport utility, even as the global economy sputters.
A year and a half after Ghosn’s downfall, many of the key players remain in limbo. Nada is still at Nissan, but was reassigned to a smaller portfolio. Saikawa left the automaker’s board in February and no longer has any formal ties to the company. Kelly, who lives in an apartment in Tokyo, is still waiting for his trial to start.
Then there’s Ghosn himself. The former CEO and chairman, who is living in Beirut at a house bought by Nissan, has vowed to restore his reputation and prove his innocence. Japan says it will keep seeking to bring Ghosn to justice, but the country doesn’t have an extradition treaty with Lebanon and he is unlikely to ever face a Japanese courtroom.