Former Renault group CEO and chairman of Japan's Nissan Motor Co Ltd and Mitsubishi Motors Corp Carlos Ghosn poses during a photo session at the Renault headquarters in Boulogne-Billancourt, outside Paris, on September 12, 2018, two and a half months before his arrest by Japanese authorities. Photo: AFP / Joel Saget

This is the second of two stories based on an exclusive interview with Carlos Ghosn. Part one, “Secret pay never happened,” is here.

It was a big event at the time, although mostly forgotten by now. On a mild autumn evening in 2004, Carlos Ghosn, then president and CEO of Nissan Motor Co, was inducted into the Japan Automotive Hall of Fame.

The first foreigner so honored, he joined a small group of industry giants who included Kiichiro Toyoda (Toyota Motors), Soichiro Honda, Osamu Suzuki, Tsuneij Matsuda (Mazda) and, from Nissan, Masujiro Hashimoto.

Unlike the others, Ghosn hadn’t built an auto company from the ground up. He’d rebuilt one, a deeply troubled company, raising it from near bankruptcy. Starting with his June 1999 arrival in Japan to lead Renault’s restructuring team, he had changed almost everything about how Nissan ran its business.

“I was managing a company which was in shambles,” Ghosn, from his current exile in Beirut, Lebanon, recalled in an exclusive interview with Asia Times and Wards’ Automotive.

The story of Ghosn’s restructuring of Nissan became legend and made Ghosn a national hero in Japan.

When the Brazilian-French-Lebanese executive arrived at Nissan’s former Tokyo headquarters in the Ginza, initially as chief operating officer, Nissan was on track to report a 684 billion yen (US$6.3 billion) loss in fiscal 1999.

Five years later, when the hall of fame committee held its annual awards ceremony, Nissan was on track to realizing the largest profit in its then 71-year history, 512 billion yen ($4.7 billion), on record sales. It would do even better in fiscal 2005. And its debt had been cut to nearly zero.

The dramatic reversal of fortune would earn Ghosn a promotion. In 2005, while keeping his Nissan management hat, he would be named president and CEO of Renault SA. And his achievements would earn him awards, including the prestigious Blue Ribbon Medal from the Japanese emperor.

From national hero to fugitive: Carlos Ghosn, second from right, president of Japan’s Nissan Motor, and his then-wife Rita, right, are welcomed by Japanese Emperor Akihito, second left, during the annual autumn garden party at the Akasaka Imperial Garden in Tokyo on October 28, 2004. Photo: AFP / Toru Yamanaka

All of this made his sudden arrest and incarceration on November 19, 2018, shocking beyond belief. Even more astonishing was his daring escape from Japan 13 months later as 2019 ground to a close.

Ghosn and I had spoken one-on-one two months before his escape. At that time he wasn’t at liberty to speak on the record. He feared, and rightfully so, that he would be rearrested if anything he said in his own defense made its way into print.

This time, speaking via Zoom from Beirut on May 21, Ghosn pulled no punches while taking aim at Nissan’s business performance and at the executives he accused of engineering a boardroom coup.

“The responsibility of this group of people inside Nissan, the prosecutor of Tokyo and the government of Japan for the demise of Nissan is huge,” he said. “And it is not only Nissan. Look at Mitsubishi. Mitsubishi was in the middle of a recovery in 2017 and 2018. Look what happened to them in 2020. And look at what happened to Renault.”

Yes, let’s look at Mitsubishi Motors Corp, which is owned 34% by Nissan, and at Renault, Nissan’s largest shareholder. Mitsubishi reported a 95.3 billion yen ($868 million) operating loss in fiscal 2020, one of the largest in its history.

Renault’s deficit ballooned to 2 billion euros ($2.4 billion), while Nissan was 150.7 billion yen ($1.4 billion) in the red. Combined operating losses of the three Alliance partners totaled $4.7 billion. Net losses after tax swelled to $17 billion.

And the situation at Nissan seems to have been the result of a series of unforced errors. Ghosn argues that Nissan’s board could have removed him at any time without criminalizing any contract dispute or his expenses or his alleged misuse of the CEO reserve fund. The civil law is available for such arguments.

In the view of Ghosn – who is living in Lebanon, out of reach of Japan’s “hostage justice” system – the Renault-Nissan Alliance has suffered grave damage due to a decision by a group of rogue executives.

These included a statutory auditor Hidetoshi Imazu, who went to the prosecutors’ office rather than telling the board about his suspicions of malfeasance; a corporate lawyer, Hari Nada, who plea-bargained to avoid prosecution for his own role in planning Ghosn’s future compensation package; and an ex-bureaucrat, Masakazu Toyoda, who had been out of a job when he joined the effort to oust Ghosn.

British Finance Minister Alistair Darling, right, chats with Nissan Motor Executive Vice-President Hidetoshi Imazu as he visits the headquarters of the automaker in Tokyo on February 8, 2008. A decade later, as Nissan statutory auditor, Imazu bypassed the board of directors and went straight to criminal prosecutors with his story of Carlos Ghosn’s alleged malfeasance. Photo: AFP /Toru Yamanaka

How much damage?

“Three years ago, we had three companies on the starting block for industry leadership – Toyota, Volkswagen and the Alliance,” Ghosn said. “We now have only two.”
“I don’t think the Alliance is going to make it again” to that top level, Ghosn declared – “particularly with the kind of mindset and leadership they have.”

“Obviously, people inside the Alliance talk to me,” he added, “so I know what’s going on. They tell me what’s not happening that used to happen, that there is no more vision, that there is no vision on technology and products, and that management is focused on the short term.”

Ghosn noted that Nissan had seen its global market share decline since 2016 – including in two of the world’s leading markets, the United States and Europe.

While it has held steady in China, it now ranks fifth in Japan behind Toyota Motor Corp, Honda Motor Co and two makers producing primarily minicars.

It is not profitable and must restructure again. The automaker has set reasonable targets with its “Nissan Next” mid-term restructuring plan it announced a year ago in May, but the plan has the feel of pre-Ghosn plans in the 1990s that failed to achieve their objectives. And the hole Nissan has dug for itself is deep.

In the two business years since Ghosn’s removal from management, Nissan has reported 1.1 trillion yen ($10.1 billion) in net losses; has seen its market capitalization shrink by nearly $8 billion, or more than 40%; is being forced to lay off more than 10% of its global workforce; and must close at least two plants, including one in Spain, while reducing global production capacity by 20%.

In the January-March 2019 business quarter, which immediately followed Ghosn’s arrest, Nissan’s operating profit margin crashed to 0.1%. It has been mostly downhill ever since (see table). Granted, Covid played a role, but most other leading automakers in Asia, Europe and North America were profitable.

Nissan’s operating profit margin.

One of the early leaders in electric cars when it launched the Leaf in December 2010, the automaker has fallen out of the top 10 and the Leaf now ranks seventh on the global best-seller list.

Both Nissan and the Alliance have fallen behind their main global competitors – Toyota and the Volkswagen Group. While sales volumes of all three are down from their 10 million unit-plus peaks several years ago, Alliance sales have fallen the farthest, 15%, to slightly below 9 million in 2020.

Ghosn homed in on earnings, pointing out that the Alliance reported a staggering 13.8 billion euros net loss in 2020. That comes to $16.7 billion in the red – compared with $20.8 billion (2.3 trillion yen) and $10.7 billion (8.8 billion euros) profits at Toyota and Volkswagen.

“And you know what they said?” Ghosn asked derisively. “Covid. They think people are stupid and that Covid didn’t touch Toyota, Volkswagen or even PSA” – Peugeot Citroën, which reported a 2 billion euros ($2.4 billion) net profit. “Not a single person had the courage to say that if they want to fix this problem they need to look it in the eye to get a clear diagnosis about the future.”

Alliance management “is still hiding behind Covid and ‘Carlos Ghosn’s expansionist strategy.’ Those are their two rationalizations. Well, if they maintain that diagnosis, there is no reason to think they’re going to recover,” he warned.

When asked if he thought history would look kindly upon him, he said: “Look at the results at Nissan. We’re business people. How can you say that I wasn’t a good leader after you see 18 years of results compared to the past two to three years of the guys [currently] running the company. It’s a disaster, not only at Nissan, but also at Renault and Mitsubishi.”

Growth overemphasized?

But was he too focused on growth as some of his critics have argued?

“That is the job of any CEO,” said Ghosn – “to grow his company and to grow it in a profitable and harmonious way. The fact that Nissan is not able to do that anymore is not a question of strategy. It is a question of execution. It is a question of vision. It is a question of quality of execution.”

Looking at the metrics by which one normally judges business performance, there is little doubt that Nissan and the Alliance have taken two steps backward without a clear prospect of taking even one step forward following two years of dreadful results.

“Nissan is effectively back where it was when Carlos Ghosn arrived in 1999 to restructure and revitalize the organization,” reflected veteran Tokyo auto analyst Koji Endo, who has tracked the Alliance from the beginning.

But the most prophetic comment may have come from the late Osamu Masuko, Mitsubishi’s CEO and Ghosn’s Alliance partner and friend, the day after Ghosn’s arrest. 

“I don’t think there is anyone on earth other than Ghosn who could run Renault, Nissan and Mitsubishi,” said Masuko, who some days after the arrest was forced to move on and accede to Ghosn’s removal from Mitsubishi’s board, where he served as chairman, in the face of a drumbeat of damaging leaks, many coming from the prosecutor’s office.

If Masuko is right and no one other than Ghosn can manage the Alliance, it is not inconceivable that the Alliance will go the way of most other major alliances dating back to Daimler-Benz AG and Chrysler Corp in 1998.

Fiat Chrysler hasn’t failed; nor, perhaps, Tata with Jaguar Land Rover. Not great successes, but not failures. But most have failed. In addition to Daimler-Benz and Chrysler, the failures include Ford Motor Co and Mazda Motor Corp; General Motors Corp and Suzuki Motor Corp; and Daimler AG and Mitsubishi.

Trouble with a capital T

Nissan isn’t willing to move on from Ghosn. The automaker is still trying to get money from him, having filed a 10 billion yen ($91 million) damages suit for money it accuses him of having misappropriated.

Based on my own reporting and a reading (and viewing; see below) of Bloomberg News reporting about the manner in which an internal Nissan investigation was conducted, it can be said at the very least that the case is not clear-cut. And others have argued that the continued focus on Ghosn is a distraction from Nissan’s main business of selling cars.

Bloomberg, in a special report about an “insider” who blew the whistle on Nissan’s main whistleblower, Hari Nada, raises questions about conflicts of interest in conducting the investigation into Ghosn’s and American Greg Kelly’s alleged crimes. Kelly is now on trial in Tokyo for his alleged role in helping Ghosn conceal Ghosn’s post-Nissan retirement package.

Ravinder Passi, who – as Nissan’s global general counsel – was tasked with investigating the Ghosn affair, was forced to leave Japan when he questioned the independence of the investigation. In particular, he noted that Nada still apparently was working behind the scenes.

“Yeah, it was corrupt, dirty with a lot of conflict of interest,” Ghosn told me. He went on:

I don’t know if you had the opportunity to see the video of the interview of Ravinder Passi, who was general counsel of the company and who resigned from Nissan because he considered that this was not a real investigation. This was something which was aimed at a specific objective from the beginning.

And today he is suing Nissan. He is based in the UK, and he’s suing Nissan. And he’s telling really scary stories about how they extract from reports whatever is interesting for them. And they forget the rest … what people meant by being very selective on the information.

And when he said, “Look, I’m here to be a lawyer, I’m not here to be a member of the KGB,” he really described exactly the situation in which he found himself. And he said: “I just don’t want to do that.” And he resigned from the company, and the company treated him in a very, very dirty way.

I think the case of Ravinder Passi is very enlightening about the methods used by some executives of Nissan with the support of the Tokyo prosecutors and part of the Japanese government. I mean, this is clear.

The investigation report, which was delivered to the board by Nissan’s audit committee in September 2019, didn’t mention that one of the audit committee members was Masakazu Toyoda, the former Ministry of Economy, Trade and Industry official who helped engineer the coup.

Ghosn and co-author Philippe Riès in their recent book in French Le Temps de la Verite (Time for the Truth), characterize Toyoda as the “brains” behind the coup.

Asked in our interview about a former METI man having so much influence on Nissan, Ghosn replied that “governments shouldn’t try to run car companies. They meddle and disrupt, and they disrupt in a way in which people who rise to the top are more eager to please than deliver. That’s what happened. Pleasers never do the job in a competitive industry and surely not in an industry as brutal as the car industry.”

Nissan Motor’s chair of the board of the directors, Yasushi Kimura, and chair of nomination committee, Masakazu Toyoda, attend a press conference to announce the companyís new CEO at its headquarters in Yokohama on October 8, 2019. Photo: DP / Behrouz Mehri

Asia Times asked to speak to Toyoda for this report but were refused.

In addition to heading the outside directors group on Nissan’s board, Toyoda serves as head of the nomination committee, which recommends who should serve on the board. It should be noted that he came with no automotive experience – and it was the same with the other committee members.

Only one, Jean-Dominique Senard, chairman of Renault’s board of directors, even came from a manufacturing industry. Prior to joining Renault in 2019, Senard had been CEO of Groupe Michelin, a tire maker.

Nissan’s new board, which the automaker announced in February, has grown to 12 members – eight of whom, including all seven outside directors, have no discernable experience in the auto or supplier industries.

A source who has followed the Alliance closely since its inception characterized the new board as “not independent,” then added: “It is ingrown, with no diversity given that more than 85% of Nissan’s sales are outside Japan. You would expect that the board would have more representation from key markets – China and the US, in particular. 

“And to not have addressed this mess created by current and former people in Nissan’s management means that the new board has not fulfilled its function of oversight. On that, there is zero ambiguity.”

A lack of urgency

When Ghosn first spoke at the Foreign Correspondents’ Club of Japan in November 2000, a little over a year year after announcing his Nissan Revival Plan, he laid out a vision of what had to be done to save Nissan.

A sense of urgency: Newly arrived Carlos Ghosn, sent from French auto maker Renault SA, poses for pictures with Nissan’s first model – made in 1932 – at its headquarters in Tokyo on April 28, 1999. Photo: AFP / Toru Yamanaka

“When you start an operation like this,” he declared, “you have to have a burning platform,” which he went on to explain in graphic terms. “Imagine yourself in the ocean on a platform in the middle of nowhere, and there is a fire on this platform. When you have a burning platform, you know that you cannot stay there. You know that you’re going to have to choose one direction. And you don’t see exactly the point where you will be arriving.

“We had a superb burning platform in Nissan,” he noted then. “The company had been losing market share for 26 years in Japan. Worldwide, we had been losing market share for 10 years. The debt at the end of 1998 was above 2 trillion yen ($18 billion). We had been unable to make profits for a decade, or when we made profits they were not significant. 

“We had to establish a lucid and objective diagnosis about why we are on a burning platform. If we didn’t understand why we were on a burning platform, then there were not a lot of things we could do to prepare for the future. We have established a lucid, objective and constructively critical diagnosis of the situation of the company.”

In sum: “We lacked a sense of urgency and there was no long-term vision about what Nissan’s future should be.”

If one looks in vain for signs that those running Nissan today lack that sense of urgency, what might have interfered to prevent its arousal?

We talked with Ghosn about whether Nissan had corporate governance problems when he was in charge as some analysts have concluded – or, rather, as some of his advocates argue, this is a false narrative to deflect attention away from individuals who had clear conflicts of interest, mainly the coup plotters who engineered his removal.

“Our governance wasn’t perfect, but nobody has a perfect governance or compliance system,” he admitted. “This was about a few people whose intention was to get rid of me. We now know that it started in February 2018 when the board of Renault confirmed that they would be asking me for a new mandate [contract] and when the French government said, ‘We supported Carlos Ghosn for a new mandate because we want him to make the alliance irreversible.’

The French multinational automobile manufacturer Groupe Renault headquarters, Renault-Nissan-Mitsubishi Alliance, in Boulogne Billancourt. Photo: AFP / Eric Piermont

“Panic set in,” he said, “in Tokyo and Yokohama, both at METI and Nissan. Some people said, ‘This guy’s against the merger, but he’s going to prepare the next step of a holding company before a merger takes place when he’ll be gone and the French government will really be in a position of power with nobody to oppose them.’

“So they concluded that the only way to get rid of me and prevent the Alliance from becoming irreversible – and this is clear in a document revealed by Hari Nada in May 2018 where he’s checking different boxes – was through judicial procedures.

“And why? Because a board meeting would not be sufficient. If they held a meeting of the board – and by some chance a majority of members said, ‘No, Mr Ghosn, we’re sorry, your explanation about compensation is not sufficient, we thank you for your services, you’re out’ – there was always a chance I could come back and clean house.

“Remember, there was no damage to the company because nothing was paid” under a tentative but non-binding agreement regarding retirement compensation. “They felt that when I went back to Renault, considering that Renault still owns 43% of Nissan shares, the only way to completely neutralize me was to put me in prison. You couldn’t put me in prison in France, so you’d have to do it in Japan where they would control the situation totally.”

Not only did the coup-plotters want him in prison, Ghosn added; they wanted him to stay there. “Everything was done with the intention of not letting me get out in order to make sure I would never come back and that my image would be destroyed so that I could not pose a threat to making the Alliance irreversible. 

“So we see what has happened with the Alliance. It is now irreversible, but in the other direction. I don’t think there is any serious work beng done and the three companies are in very bad shape,” he said.

Is there anything he would have done differently?

“I would have joined General Motors in 2009 when Steve Rattner offered me the job,” he said, referring to the Obama administration’s auto bankruptcy czar. “I would have refused to renew my mandate at Renault in 2018. I really hesitated to take another mandate, and I took the wrong turn. It happens in life. But if I would have decided not to renew my mandate, none of this would have happened.”

“I have never been paranoiac, but I should have been much more cautious because when I see the depth and ease with which this machination has been mounted against me, I obviously made a mistake with people in general and governments in particular.”

“You can trust, control and verify,” he added. “I trusted, I had control, but not as much as I should have.”

Was he too far removed from some of the people at Nissan, in particular the Japanese? Or was this small group that organized the coup an aberration?

“I was not CEO anymore in 2017. Let’s not forget that. I was chairman of the board, so by definition, the CEO is much nearer to the operation than the chairman. And I put myself there. I think the mistake in Japan is that you cannot be a foreigner and not be in control. If you’re a foreigner, you are either in control or you get out, but you don’t stay in between.”

Life in Lebanon

We did not discuss corporate perks and some of his alleged lavish spending – which in the past would have been fodder for the tabloids – and whether Ghosn may have overdone them. Perks, if you speak to industry old-timers, are part of the auto industry’s culture. They may be unseemly to some, but that alone doesn’t make them criminal.

On a personal level, Ghosn has had his Covid shot. And as for life in Lebanon: “I’m safe. I’m free. It’s a limited freedom because I can’t get out from Lebanon, but I’m free. I’m very busy between my program at the university” – teaching at the Université Saint-Esprit de Kaslik, which “I’m doing pro bono ” – “plus my legal battles and the publications, documentaries and movies I’m working on.

Carlos Ghosn’s home, with stone facade, in a wealthy neighborhood of the Lebanese capital Beirut. Photo: AFP / Anwar Amro

“I am also taking care of some businesses and investments I’m interested in. And I’m finally enjoying being free with my time.” After managing Nissan alone, “then I managed two companies. And then we added Mitsubishi. So I always had a life where time was very rare for me to do things I wanted to do. 

“So I’m enjoying a kind of freedom. I lament the fact that I would have liked these past few years to be different, obviously. Life is going in a completely different and challenging direction that I don’t think I deserve.

“And I think when you look at what I’ve done for these three companies and see how I’ve been treated by them, probably the future will say this is tragic. Obviously, it’s been tragic for me – but even for the three companies, I think.”

One can think of 40 billion reasons why it’s been tragic for the companies: $23 billion in net losses over the past two years, nearly half Nissan, and more than $17 billion in lost market cap over the past 30 months as all three companies have become poorer.

I had met Ghosn briefly in November 2019, two months before his escape, to see how he was holding up and to wish him well; also, to take a picture with him for the wall in my study.

He had always been respectful to the press and the idea that he would probably spend most of the rest of his life in a Japanese prison didn’t set well with me. I am sure he saw concern on my face.

My first question on that earlier occasion was whether he spoke Japanese. Nissan wouldn’t answer that simple question. They were clearly doing damage control – but ineptly, since they had shifted to full spin mode with selective disclosure of facts.

Why was the question about Ghosn’s language skills important? Because if the crime of altering financial reports went down as alleged by both Nissan and the Tokyo prosecutors office, then two guys who couldn’t read, write or speak Japanese but worked in a Japanese company in Japan, they couldn’t have pulled off for eight years a caper of the magnitude the corporation eventually alleged without many people in the organization becoming aware.

I say two guys. I learned early on that former Nissan board member Greg Kelly, who is currently on trial, wasn’t conversant in Japanese.

Ghosn in our interview found bitter irony in the way Kelly and then Passi had gotten dragged into the case: “Hari Nada was the right-hand of Greg Kelly. The guy who hired Hari Nada is Greg Kelly. The guy who promoted Hari Nada is Greg Kelly … Ravinder Passi was the right-hand man of Hari Nada. So Hari Nada turned on Greg and Ravinder Passi turned on Hari Nada.”

When we spoke last month, Ghosn looked relaxed and healthy. I don’t know whether he’ll ever clear his name, but surely at some point we must stack up the losses – how much money Nissan would have had to pay Ghosn to keep him happy and how much money Nissan has lost by criminalizing what essentially amounts to a probably feigned contract dispute over compensation.

Roger Schreffler is a veteran correspondent for Ward’s Automotive and a former president of the Foreign Correspondents’ Club of Japan.