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Carlos Ghosn's arrest threatens Renault-Nissan alliance with paralysis

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Mr Ghosn built up the partnership between the French and Japanese companies that has grown to challenge rivals like Volkswagen.

Tokyo

RENAULT and Nissan Motor Co's auto alliance is threatened with disarray over a rift between the partners about how to fill a leadership vacuum as its chairman, Carlos Ghosn, remains in custody in Japan.

Executives overseeing the Amsterdam-based alliance are scheduled to meet on Thursday in their first encounter since Mr Ghosn was arrested last week on allegations of understating his income and misusing Nissan's assets. Nissan chief executive officer Hiroto Saikawa and others may attend by video conference, according to people familiar with the matter.

Mr Ghosn remains chairman of the partnership, which includes the smaller Mitsubishi Motors Corp. In his absence, one option being pushed by Nissan is to split the top job at the alliance between all three companies, one of the people said.

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But the French government, Renault's most important shareholder, is sticking to the principle that the carmaker's chairman should lead the alliance, a view shared by officials at Renault.

The leadership void stems from Mr Ghosn's outsized role atop the alliance. He engineered the partnership between the French and Japanese companies that has grown to challenge Volkswagen AG as the world's biggest vehicle producer. Under governance rules and a broad outline of the way it functions, decisions and recommendations "are always made by consensus between the two shareholders".

This worked when he headed all three partners, but in the past week, he has been removed as chairman of Nissan and Mitsubishi.

Nissan is aiming to make a decision on who will succeed the 64-year-old as interim chairman by its next board meeting on Dec 17, according to a person familiar with the matter. Nissan has said three external directors will nominate a candidate from the remainder of its board members.

The Franco-Brazilian executive, who has been ousted as chairman by the two Japanese partners, has denied wrongdoing, according to NHK, Japan's national broadcaster. Nissan made annual records of the compensation to be paid at a later date to Mr Ghosn, the Nikkei reported.

Tokyo prosecutors view that the amount of pay Mr Ghosn would receive was fixed at the time the records were made and therefore he was required to declare this deferred pay in securities reports, the Nikkei said.

Mr Ghosn told the prosecutors that former representative director Greg Kelly told him that the way he reported his remuneration was legal, the Asahi newspaper reported.

The turmoil at the alliance comes at a critical moment, when carmakers across the globe are wrestling with an array of challenges, from slowing sales in key markets to long-term technological change that requires massive investment.

That is why analysts say it's essential for the partners to sort out their differences or risk falling behind rivals from Germany to Silicon Valley. Nissan is aiming to redress perceived imbalances in the alliance by limiting the power of its French partner to nominate officials to its own board and appoint the chairman of the alliance, Bloomberg has reported.

French Finance Minister Bruno Le Maire on Sunday called the alliance "indispensable", and said he wants to strengthen it while maintaining the existing cross-holdings and governance rules - including one that requires Renault's chairman to serve in the same role as head of the alliance.

Renault's board stopped short of ousting Mr Ghosn, instead naming deputy Thierry Bollore as interim CEO. Renault has a 43 per cent voting stake in Nissan, which in turn owns just 15 per cent of Renault, with no voting rights.

It's clear that tensions between the two carmakers would render decision-making within the alliance tricky. While the French partner has the power to appoint the chairman, the vice-chairman - currently Mr Saikawa - comes from Nissan.

Mitsubishi Motors CEO Osamu Masuko said Monday he would follow the meeting in Amsterdam via video conference to discuss its future with the heads of the three companies, adding: "I don't think one meeting will set everything about the future."

A Daimler AG executive may also participate in the meeting, two people said. The German carmaker has stakes in both Renault and Nissan. BLOOMBERG