Nissan and Renault Wrestle With the Fallout From Ghosn’s Arrest

PARIS — French carmaker Renault began making preparations Tuesday to fill the gap left by the arrest of Carlos Ghosn, its chief executive who is facing questions of alleged financial misconduct, as a leadership crisis deepened inside the world’s biggest auto alliance.

Prosecutors in Japan are investigating claims that Ghosn, who is also chairman of Nissan and Mitsubishi Motors, underreported his taxable income by half for several years.

One of the auto industry’s most prominent executives, Ghosn was arrested Monday in Japan and held for questioning, but has not yet been charged. The prosecutor’s office in Tokyo said it could hold him for 72 hours but, with a court’s approval, could extend the detention an additional 20 days before it decided whether to indict him.

Ghosn created the alliance of Renault, Nissan and Mitsubishi, and has been hailed for rethinking how vehicle manufacturers could share technologies and innovate in a competitive global market. His arrest stunned the sector and sent Nissan’s share price falling to a two-year low Tuesday.

But even as Nissan and Mitsubishi prepared to quickly sever ties with Ghosn, the French government, which is Renault’s biggest shareholder, was proceeding more cautiously.

The French economy minister, Bruno Le Maire, said Tuesday that Ghosn was “no longer in a position capable of leading Renault” because of his troubles in Japan.

But Le Maire said France had no evidence of the crimes that Ghosn has been accused of committing in Japan and would not call for his removal from the board of Renault, a French corporate icon. Renault board members were preparing to meet in an emergency session Tuesday.

In a joint statement released Tuesday afternoon, Le Maire and Hiroshige Seko, the Japanese economic minister, said that they had spoken by phone and “reaffirmed the strong support of the French and Japanese governments to the alliance formed between Renault and Nissan.”

Ghosn was detained on his private jet at Haneda Airport, which serves Tokyo, after a whistleblower at Nissan made allegations that he had underreported compensation to the Japanese government. Another executive, Greg Kelly, whom authorities described as the architect of the scheme, was also arrested.

Neither Ghosn nor Kelly could be reached for comment.

After a monthslong internal inquiry, Nissan said it was planning to strip Ghosn of his position as chairman when its board meets Thursday.

Ratings agencies warned of the scandal’s financial impact. Standard & Poor’s said it could downgrade Nissan’s credit rating over the allegations, a move that would raise the company’s borrowing costs.

Nissan’s profitability could “weaken substantially” in the fiscal years 2018 and 2019 if it turned out that Ghosn’s alleged misconduct had hurt sales or the company’s alliance with Renault and Mitsubishi, S&P said in a statement.

Moody’s Investors Service said that the scandal raised questions about Nissan’s compliance and control systems “given such an incident occurred and seemingly went unreported for some time,” and that it could affect the company’s credit rating.

Ghosn instituted sweeping changes at Nissan beginning in 1999 and created a working arrangement between Nissan and Renault that allowed them to operate like a single carmaker. In 2016, that agreement included Mitsubishi and all three shared the cost of developing models and cooperated on their supply chains. In 2017, the alliance accounted for the sale of 10.6 million cars.

Ghosn’s swift downfall raised questions about the stability of the alliance as well as of the individual carmakers.

That prospect is particularly worrisome in France where Renault has more than 47,000 workers.

Renault has a 43 percent stake in Nissan and Nissan holds a 15 percent share of Renault — the same size as that of the French government. As one of Japan’s best-selling carmakers, Nissan is the heavyweight partner in the alliance.

President Emmanuel Macron of France, who is facing political challenges at home and plunging poll numbers, can ill afford to see Renault stumble. He called Monday for the alliance to stick together, saying that the state would be “extremely vigilant” about its future.

France’s influential CFE-CGC labor union said it was worried about Renault’s future and urged that “all measures be taken to preserve the interests of the Renault group and the alliance.”

In Japan, Mitsubishi announced that it was planning to conduct an internal investigation into whether Ghosn might have also “engaged in misconduct” there by similarly underreporting his compensation.

Le Maire said the authorities in France had found nothing suspicious in Ghosn’s activities in that country.

“There is nothing special to report on the fiscal situation of Mr. Ghosn in France,” he said. But, he added, if the allegations by Nissan in Japan were true, “it would be of considerable gravity.” “Concealment and tax evasion is particularly troubling when one holds an influential position and a very high salary,” he said.

A possible replacement for Ghosn at Renault could be the chief operating officer, Thierry Bolloré, Ghosn’s deputy. Renault said Tuesday that Bolloré would continue to oversee the executive committee, meaning Renault could still operate without Ghosn.

In an internal memo to employees Monday, Bolloré expressed “full support” for Ghosn and said management would defend Renault’s corporate interests.

Neither Nissan nor Mitsubishi signaled possible successor. But Standard & Poor’s, in its note, said rebuilding Nissan’s management structure could be a challenge.

“Although Nissan said it aims to identify its governance issues and hammer out preventive measures, we think rebuilding its management culture swiftly will not be easy,” the ratings agency said.