Written by Amy Chozick and Motoko Rich
Carlos Ghosn was tired. At 64 years old, the chairman of an auto empire that spanned several continents and included Nissan, Renault and Mitsubishi wasn’t bouncing back from jet lag the way he used to. He planned to retire soon, stepping back from spending his life on an airplane, albeit a luxurious one paid for by Nissan.
Last month, just before Thanksgiving weekend, Ghosn headed to Tokyo to meet his youngest daughter and her boyfriend and attend a board meeting. He was scheduled to land at Haneda Airport at 4 p.m.
The daughter, Maya Ghosn, 26, had spent most of her childhood in Japan and wanted to introduce her boyfriend, Patrick, to her favorite places. Maya Ghosn had made a 7:30 dinner reservation at Jiro, the Michelin-starred sushi counter hidden in a basement in the city’s Ginza district. He never made it to dinner.
On Nov. 19, Japanese prosecutors surrounded Ghosn’s Gulfstream after its arrival and arrested him on allegations that for years he had withheld millions of dollars in income from Nissan’s financial filings.
Carlos Ghosn wasn’t supposed to succeed in Japan, but he wasn’t supposed to fail like this. He first made headlines in 1999 when, in a nation known for its distrust of outsiders, Ghosn, a brash Brazilian-born and Lebanese- and French-educated engineer, showed up in sunglasses and a pinstripe suit with plans to carry out an American-style restructuring of a failing Nissan. The Japanese carmaker had $35 billion in debt, provided lifetime employment to a bloated workforce and produced a fleet of the kind of cars you’d dread getting at the rental counter.
Ghosn, then 45 and a vice president at Renault, had helped oversee a turnaround at the middling French automaker, which had agreed to spend $5.4 billion to buy a 36.8 percent stake in Nissan Motors.
John Casesa, then a top auto analyst at Merrill Lynch, advised Ghosn to rent a house in Tokyo rather than buy one. “The widely held consensus was that he would fail, that Nissan wasn’t worth saving and it couldn’t be done,” Casesa said.
But Ghosn was undeterred. He closed factories, slashed suppliers, laid off 14 percent of the workforce and invested in design. Six years later, Nissan had surpassed Honda to become Japan’s No. 2 automaker, its market capitalization had quintupled and its operating margin had risen tenfold. Altima sedans, Titan pickup trucks and Murano SUVs made Nissan a major player in the U.S. market — an achievement that Wall Street once deemed impossible.
By the early 2000s, Ghosn was head of the Renault-Nissan alliance and the first person to simultaneously serve as chief executive of two Fortune Global 500 companies, the type of chief executive who even if you didn’t know how to pronounce his name (rhymes with phone), you’d know his products.
But even as many in Nissan celebrated the comeback, others scoffed at Ghosn’s celebrity. From the start, he faced distrust from the Japanese policymaking and business establishment. The very idea of an outsider’s bringing free-market capitalism to Japan’s quasi-socialist corporate culture jabbed at historical wounds.“When MacArthur came after World War II, the Japanese just surrendered to his leadership,” a retired Nissan executive told Newsweek.
The stickiest issue was always Ghosn’s pay.
In Japan, salarymen slave away at the kaisha (or company) with a sense of communal pride almost as important as the salary. Last year, Ghosn made $16.9 million ($8.4 million from Renault, $6.5 million from Nissan and $2 million from Mitsubishi). That’s nearly 11 times what the chairman of Toyota, the world’s largest carmaker, earns but well below the $21.96 million paid to Mary Barra, chief executive of General Motors.
In October, a whistleblower inside Nissan said he had evidence that Ghosn had been instructing Greg Kelly, a top aide and a board member, and a small group of confidants at Nissan to effectively create two salary pots for Ghosn’s compensation.
One pot would be paid in the current year and reported in the company’s annual report and securities filings. Another amount would be designated to be paid out after Ghosn left Nissan, according to a person familiar with Nissan’s internal investigation. The whistleblower’s findings were sent to Hiroto Saikawa, the company’s chief executive, and an internal auditor.
Nissan went to prosecutors with allegations that Ghosn, working directly with Kelly, who was once the head of human resources at Nissan, had underreported his income from 2009 to 2017, according to a person with knowledge of the internal investigation. Nissan’s investigation found that the underreporting had occurred when some of the compensation, though committed, was deferred and not reported in securities filings.
Nissan also told prosecutors that it had evidence Ghosn and Kelly developed plans to pay Ghosn a further $124 million in cash and other financial instruments, some as compensation for a future advisory position for Ghosn.
Hari Nada, a Nissan executive and confidant of Kelly’s, sent a private jet to fly him from Nashville, Tennessee, to Tokyo for the same board meeting that Ghosn planned to attend. The two men were arrested hours apart. Kelly’s family said Nada had assured him that he would be back in Nashville by Thanksgiving, in time for scheduled neck surgery. Nissan would not comment about the Kelly family’s statements about Nada. Nada did not answer phone calls seeking comment.
Kelly was released on Christmas after his family cited his ill health and posted bail of 70 million yen (about $640,000). His lawyer in Nashville, Aubrey Harwell Jr., said his client denied wrongdoing. Ghosn, Kelly and Nissan itself all face charges they violated financial reporting laws. The company’s board removed Ghosn and Kelly as representative directors, positions with power to sign company documents.
Thirty-two days after Ghosn’s initial arrest, when his release on bail appeared likely, Japanese authorities rearrested him on new charges that he shifted personal losses during the 2008 financial crisis temporarily onto Nissan’s books.
That Ghosn may have deceived regulators while enriching himself runs afoul of cultural norms in Japan, where the public is more likely to forgive corporate cover-ups when executives appear to be protecting the company.
As Jesper Koll, who has worked in Japan for decades as an economist and is head of Japan for WisdomTree investments in Tokyo, said: “The one thing that Japan does not want and would never tolerate is personal greed.” Under Japanese law, only Ghosn’s Japanese lawyer and representatives from the French, Brazilian and Lebanese embassies have been allowed to visit or talk to him.
Ghosn’s allies view his incarceration, with no foreseeable chance for bail, as revenge by Nissan (and, by extension, Japan) on a foreign adversary. He lives in a 16-by-10-foot cell with a tatami mat, a toilet in a corner and the lights always on.
Ghosn’s defenders, largely in the business community, contend that he is being treated harshly because he is a foreigner. They claim that the latest charge, rooted in dealings from 2008, was beyond the statute of limitations for Japanese citizens. According to Japanese law, the statute is tied not to citizenship but to how much time the accused has spent outside Japan. “It seems really strategic. It’s a political fight,” said Ralph Jazzar, a banker in Paris and Ghosn’s first cousin.
Critics inside and outside Nissan had started to question whether Ghosn’s star had faded. In recent years, sales had slowed. The miraculous turnaround he orchestrated started to stall. Midway through a plan known as Power 88, which Ghosn unveiled to much fanfare in 2011, it became clear that Nissan would fall short of the ambitious targets he had set. He wanted Nissan to reach 8 percent profit margins and 8 percent market share in the countries where it operated. Dealers complained that they were losing money and that Ghosn’s big incentives to buyers to meet his targets were eating into their margins.
Ghosn’s daughters said that in the past few years he had started on a succession plan to help cement his legacy and plan for his retirement. Ghosn explored what he called a “reimagining of the alliance” that would permanently bind Nissan and Renault. And he picked Saikawa, his close confidant, to succeed him as chief executive.
But as Ghosn sought to integrate Nissan’s operations more closely with Renault, maybe connecting them permanently, the relationship was getting shaky. Some Nissan executives, engineers and marketing staff began to resent what they saw as Renault’s unfairly piggybacking on Nissan’s technology, research and brand strength, according to three former managerial employees.
Asked about merger discussions, a Nissan spokesman, Nicholas Maxfield, said, “It is true that the ‘Alliance 2022’ six-year plan announced last year calls for additional synergies and further convergence among member companies in specific operational areas.”
What doesn’t make sense to Ghosn’s friends and family is how the man with a preternatural talent for seeing around every corner didn’t see this coming. Maybe, they theorized, it was the jet lag and the 100 days a year he spent on an airplane.
Jazzar, his cousin, said Ghosn had failed, in the end, at the “PYA” approach to management: Protect Your Ass. “God only knows what is going on inside his head,” Jazzar said.