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8 January 2020

The cast-iron confidence of Carlos Ghosn

At the fugitive CEO’s press conference he showed the indomitable self-belief that has been both his making and his undoing.

By Will Dunn

Anyone who has felt guilty for putting a meal or a taxi on their company expenses should remind themselves of the night in 2018 when Carlos Ghosn, then the CEO of Renault-Nissan, invited eight friends and their plus-ones to watch the carnival in Rio de Janeiro. The bill for the evening, which was paid by a Dutch subsidiary, came to $257,872.

But this doesn’t mean “Le Cost Killer”, as Ghosn became known when eliminating tens of thousands of jobs, didn’t look to save money where he could. After all, the Rio party was significantly cheaper than Ghosn’s 2014 hiring of the Palace of Versailles, complete with teams of actors and musicians in 18th-century costume, for a party that cost the company €634,000. Ghosn chalked this grande bouffe up as a 15th anniversary party for the Renault-Nissan alliance although it took place, it so happened, on the night of his own 60th birthday.

At the time, these extravagances were overlooked as understandable or even necessary to the work of a man who had turned around two of the world’s largest car companies. As the chairman and CEO of the giant Renault-Nissan-Mitsubishi strategic partnership, Ghosn oversaw more than 450,000 employees working in 122 factories. Around the world, the alliance he led sells a new car every three seconds.

However, as he revealed in an energetic and declamatory press conference today, at which he spoke uninterrupted for 75 minutes before taking questions at length, the past year has been very different for Carlos Ghosn.

Following his arrest at Haneda airport, Tokyo, in November 2018 on charges of financial misconduct – a “surprise” that he compared today to the Japanese attack on Pearl Harbour in 1941 – he was imprisoned, he said, in solitary confinement, in a windowless cell that was lit 24 hours a day, from which he was allowed 30 minutes outdoors each day and two showers per week. During this time he claims to have been interrogated for up to eight hours at a time, by prosecutors who told him: “it will get worse for you if you don’t confess”, and, more disturbingly, “we’re going to go after your family”. In nine months Ghosn was allowed to see his wife for just two hours, with a lawyer present.

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On 30 December last year, two men checked out of a luxury hotel near Kansai international airport in western Japan and travelled the short distance to the private jet terminal, where they boarded a flight for Istanbul. They took with them a number of large cases used to ship audio equipment. In one of the cases, designed to hold speakers, was Carlos Ghosn.

“I did not escape justice,” Ghosn told the packed press conference in Beirut this afternoon, “I fled injustice.”

He also complained of being the victim of “political persecution” although he said he would not be revealing, out of respect for Lebanon’s relationship with Japan, how far this alleged corruption goes. He was less restrained in his accusations against Nissan executives, lawyers, prosecutors and anyone else who he saw as having had a role in his arrest and imprisonment. While the extent to which the Ghosn affair is a “plot”, as he claimed today, may never be established, there is certainly a compelling case to say that Ghosn suffered from having done his job too well.

Carlos Ghosn is globalism incarnate. Born in Brazil to Lebanese parents, he was educated in France in elite private schools and grandes écoles before working in France, Germany, Brazil, the United States and Japan. At the conference today he moved seamlessly between Arabic, English and French, and answered questions in Japanese and Portugese.

At Michelin and then Renault, which he joined just after it was privatised in 1996, Ghosn created a reputation as an unflinching expert in restructuring. By 1999, the previously troubled Renault had returned to profitability and sought to expand. It did so by buying a significant chunk (36.8 per cent) of Nissan (which, in return, committed to buying a stake in Renault when it had the money), and the alliance was formed.

In 1999 a merger with Nissan was described, by one US analyst, as “the worst idea I’ve ever heard of”. Plagued by inefficiencies and the Japanese economic slump, the company was $22bn in debt; 43 of the 46 cars it sold were unprofitable. But Ghosn, who was appointed as Nissan’s COO and then president following the alliance, set about restructuring on a massive scale, closing five factories, and eliminating 21,000 jobs. In a move that only an outsider could have accomplished, he all but eliminated the company’s obligations to its keiretsu, the traditional networks of co-operation and co-ownership that have long been a feature of Japanese business culture.

Despite the savagery of his restructure and his upsetting of long-established business relationships, Ghosn became popular in Japan for the changes these reforms brought to its third-largest automaker. By 2002, Nissan had announced record profits and Ghosn’s career was being serialised in a manga, The True Life of Carlos Ghosn.

But the deal that Renault had struck was, thanks to Ghosn, perhaps a little too good. The revitalised Nissan soon outgrew its partner, selling more cars from 2003 and growing at a faster rate. By the alliance’s tenth anniversary, Nissan’s market capitalisation was almost three times that of Renault, but Renault held more shares in Nissan, and a disproportionate level of control over the partnership.

The partnership had become too big for governments to leave alone. In 2014, France passed a law, la Loi Florange, that gave French shareholders double voting rights in French companies. Ghosn claimed today that the board of Renault had voted against implementing this law, but that the French government – which still owns 15 per cent of the company – intervened. “This left a big bitterness with our friends in Japan,” Ghosn observed in today’s speech; “this is where the problems started… there was no trust”.

As the alliance soured, Ghosn – whose strategy had been to pursue still more conglomeration, proposing a merger with Fiat Chrysler and a holding company through which the alliance would sell shares in all its properties – became, he claims, the target. As he fulminated at today’s conference, legal documents were projected on the wall behind him, highlighted and underlined to illustrate what he called “a systematic campaign by a handful of bad actors” to undo his global project.

It was the day in the dock that Ghosn knew Japan’s justice system – which has, he repeatedly pointed out, a 99.4 per cent rate of conviction – would never give him, and it was a bravura performance. If nothing else, it served to show the drive and unmitigated self-belief that made him one of the world’s most powerful businessmen.

In summing up, Ghosn pointed out that since his arrest, Nissan’s market capitalisation has fallen by more than $10bn dollars, and Renault’s by more than €10bn. “Who is the winner?” he asked. For Carlos Ghosn, the game is far from over.

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