Nissan will remove Carlos Ghosn as chairman after he was arrested in Tokyo for violations of financial law, throwing the car industry’s largest global alliance into turmoil.
Mr Ghosn, a towering figure who saved Nissan from collapse and brought it together with Renault and Mitsubishi Motors, was detained over the suspected breach of Japanese financial laws, Nissan chief executive Hiroto Saikawa told reporters.
Mr Ghosn and director Greg Kelly, an American, have been under investigation at Nissan for several months, and the board is set to meet on Thursday to remove them both.
Mr Ghosn and Mr Kelly were reporting pay and compensation to securities regulators in Tokyo that was less than the actual amount, Nissan said, adding that they did this to reduce Mr Ghosn’s disclosed compensation.
Regarding Mr Ghosn, “numerous other significant acts of misconduct have been uncovered — such as personal use of company assets — and Kelly’s deep involvement has also been confirmed,” the carmaker said in a statement.
Mr Saikawa said the company can’t disclose further details of the suspected wrongdoing.
Too much power being concentrated to one individual allowed for the misconduct, and Nissan failed to detect it because its structure wasn’t transparent enough, he said.
Mr Ghosn is suspected of understating his income by 5bn yen (€38.5m) over five years, Kyodo News reported.
The bombshell allegations threaten to bring down one of the car industry’s most powerful executives, who turned Nissan and Renault into a challenger to companies Volkswagen and Toyota.
They also cast doubt over the future of the alliance, a three-way pact that has sought to go deeper under the steady hand of Mr Ghosn.
While no longer Nissan’s CEO, he’s been laying the groundwork as chairman to make the alliance permanent after his departure — including the possibility of a merger.
“Investors need to be reassured,” as Mr Ghosn is a key driver of the collaboration, Jose Asumendi, an analyst with JPMorgan, said in a research note. Co-operation with Nissan “is critical to Renault’s strategy.”
The news rattled the European equity market, with shares of Renault falling up to 15% in Paris, while Nissan’s global depository receipts sank more than 11%.
The crisis at Nissan is taking place amid a tectonic shift in the car landscape.
The move toward electric and self-driving cars has forced traditional carmakers to invest billions, while new competitors like Uber Technologies and Tesla invade their turf.
Mr Ghosn would be the second major car-industry figure to leave unexpectedly before seeing through the transition.
Sergio Marchionne, who led Fiat back from the brink and engineered its merger with Chrysler, died in July, leaving former Jeep chief Mike Manley at the helm.
Nissan said it has been providing information to Japanese prosecutors and is co-operating fully with their investigation.
Mr Ghosn said in September he will continue to pare back his role at the three firms he brought together while continuing to head their alliance.
A spokesman for France’s finance ministry declined to comment on the news.
The country owns about 15% of Renault and supported Mr Ghosn’s renewal at the helm of the French carmaker.