Carlos Ghosn Never Saw It Coming
Bloomberg Businessweek|February 04, 2019

The takedown of a globe-trotting CEO

Matthew Campbell, Kae Inoue, Ma Jie, & Ania Nussbaum

One morning last November, several hundred business people filed into an auditorium on the third floor of a skyscraper in Tokyo’s financial district. The occasion was a forum marking the centenary of the French Chamber of Commerce and Industry in Japan. Among the keynote speakers was an exemplar of the two countries’ warm relationship: Hiroto Saikawa, the chief executive officer of Nissan Motor Co. and a linchpin of its almost 20-year alliance with France’s Renault SA.

In his address, Saikawa extolled the partnership, a confection of share holdings and joint production whose durability had consistently surprised skeptics. “The alliance allowed us to compete with our major rivals,” said Saikawa, who’s 65, thin, and fairly tall, with a mostly unlined face and cheeks lightly mottled by freckles. He wore rimless glasses, a purple tie, and a dark navy suit with a gold pin in the shape of Nissan’s all-caps logo at the left lapel. Rarely one for elegant rhetoric, he instead boasted of Renault-Nissan’s accomplishments: combined operations that had generated billions in savings, a strong position in electric vehicles, more than 10 million cars sold in 2017.

To those present, the speech was unremarkable, even boring. But as he spoke, Saikawa was harboring a secret known only to a tiny number of Nissan managers and a team of prosecutors in the Special Investigations Unit, an elite arm of Japanese law enforcement. En route to Tokyo at that moment, aboard a Gulf stream G650 with the registration number N155AN, was Carlos Ghosn, the charismatic executive who’d engineered the Renault-Nissan alliance and now served as chairman of both companies. He’d be landing at Haneda airport in less than six hours, prepared for a busy week: a board meeting, discussions with important Japanese officials, then a trip to China. Saikawa knew none of that would take place.

When the plane touched down, at about 3:30 p.m. that Monday, Nov. 19, Ghosn prepared to hand over his passport for inspection, a procedure performed hundreds of times since he’d arrived at Nissan in 1999. This time, though, a group of black-suited prosecutors filed up the jet’s stairs to tell Ghosn he was being arrested for violating Japanese financial law. Furious and confused, he refused at first to surrender, according to two people familiar with the events, demanding to know the charges and the evidence behind them. A lengthy argument followed, but it eventually became clear the men weren’t making a request. More than an hour after they boarded, Ghosn agreed to go.

As Ghosn was debating the prosecutors, another member of Nissan’s board, a dour American lawyer named Greg Kelly, was in a car heading into town from Tokyo’s other airport, Narita. He’d just landed on another company plane, scheduled by Nissan to coincide with Ghosn’s arrival. The plan was to surprise Kelly, who’d run Ghosn’s office before shifting to an advisory role, at his hotel in central Tokyo, bringing him into custody almost simultaneously with Ghosn in case one of them tried to warn the other, destroy documents, or flee. Traffic, according to three people familiar with the matter, intervened. As the risk grew that Kelly would learn of Ghosn’s detention, word went out to the team of prosecutors tailing behind: Pull him over. Kelly was soon arrested at a highway rest stop.

That night, Ghosn and Kelly slept in bare cells at the Tokyo Detention House, a place no executive of Ghosn’s stature had ever been held. Kelly was released on bail, but Ghosn remains confined there more than two months later, with little prospect of release. He’s been indicted for concealing his true compensation in regulatory filings by deferring as much as $80 million of pay to his retirement, and of a more serious “breach of trust” offense stemming from a 2008 decision to move personal trading losses temporarily onto Nissan’s books. The charges carry decade-long prison terms, and Ghosn, who’s 64, is fighting them in a country where prosecutors boast a conviction rate, rounded to the nearest integer, of 100 percent. Meanwhile Nissan, which fired Ghosn as chairman almost immediately after his arrest, has accused him of a wide range of further misconduct, essentially claiming he used the company as a personal piggy bank. He vehemently denies all the allegations. Kelly, who’s been charged in the deferred- compensation case, does as well.

Ghosn’s descent is the most vertiginous in the recent history of global business; during an age when corporate scandals often end with a CEO enjoying a generous severance and a lucrative second or third act, the prospect of a top executive facing incarceration is genuinely shocking. Yet while Ghosn (whose name rhymes with “lone”) may have exceeded the boundaries of acceptable corporate behavior, it’s increasingly clear that his downfall had multiple authors. The arrests were the culmination of a torrid power struggle at Nissan, one with far dearer stakes than Ghosn could have known. Riding on the outcome, in addition to his personal position, were the future of the unprecedented partnership between two of the world’s largest automotive companies and a principle the Brazilian-French-Lebanese executive viewed as sacred: that in a global economy, the bigger-is-better logic of 21st century capitalism supersedes national differences.

In a statement, Nissan said that “the cause of this chain of events is the misconduct led by Ghosn and Kelly,” for which the company found “substantial and convincing evidence” after investigating a whistle blower's report. Nissan’s focus, it said, “is firmly on addressing the weaknesses in governance that allowed this misconduct to happen.”

Barred until recently from speaking with anyone except consular officials and his lawyers, Ghosn has appeared in public only once since his arrest, at a brief January court hearing where he asserted his innocence. Even his allies don’t know entirely what to make of the allegations against him. But to some of them, his situation looks like more than the comeuppance of an executive who flew his Gulf stream too close to the sun. It looks like a palace coup.

GHOSN AND SAIKAWA’S PARTNERSHIP DATES TO 2001, two years into a corporate alliance struck when Renault rescued Nissan from the edge of bankruptcy by paying $5.3 billion for about a third of its shares. Installed as Nissan’s chief operating officer with a mandate to ruthlessly cut costs, much as he’d done at Renault, Ghosn chose Saikawa to head a new office that would coordinate purchasing between the two. A Nissan lifer who’d joined the company straight out of university in 1977, Saikawa recounted in an interview with Bloomberg News that he was surprised to be tapped for such a critical function. Nissan was a financial mess, and he’d expected to take direction from French executives rather than the reverse. He began shuttling between Tokyo and Paris, keeping an office at Renault’s headquarters. His colleagues joked, one recalls, that he’d received a transfusion of (tricolor) blue blood.

Supplies and components purchased from third parties can account for more than half of a car’s manufacturing cost. Saikawa’s job was to squeeze better deals out of vendors, including by severing many of Nissan’s ties to its keiretsu, a uniquely Japanese grouping of suppliers that receives preferential access to contracts. He excelled at the task. Brusque, demanding, and seemingly incapable of talking about anything other than business, he worked long hours even by Japanese standards and made few friends, according to several former Nissan executives. During a stint overseeing Nissan’s North American operations, he was seldom seen anywhere but the office he used in Nashville or a nearby conference room; slapping backs on the local factory floor, the sort of thing Ghosn delighted in doing, was practically out of the question.

The Renault-Nissan relationship evolved in a direction that might charitably be described as awkward. The companies officially came to share engineering resources, but current and former Nissan staffers say French and Japanese teams often worked together uneasily, disagreeing about technical standards and which technologies to prioritize. Obvious opportunities for collaboration were missed as each company stuck to its own plans—to this day, for example, Nissan’s flagship Leaf electric vehicle and Renault’s comparable Zoe share no major components. Yet the financial and strategic overhaul Ghosn imposed gradually restored Nissan to health, if never quite to the point of challenging Toyota Motor Corp. as Japan’s top automaker.

Nissan could be a hard-edged place to work, marked by intense rivalries and pressure to hit numerical targets. One former executive jokes that his time there reminded him of The Firm, the Tom Cruise movie about a law office where professional ambitions reach murderous extremes. The ultimate currency was Ghosn’s confidence, which Saikawa certainly enjoyed. One of a small corps of executives referred to internally as the “Ghosn children,” he was promoted repeatedly, eventually to chief competitive officer, with responsibility for research and development, manufacturing, and a slew of other functions. When, in early 2017, Ghosn announced that he would step down as Nissan CEO to concentrate on running Renault and the broader alliance, Saikawa took his place. “Saikawa-san is somebody I have been grooming for many years,” he said.

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