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From Hero To Zero

19 November 2018 by lberuti

The Japanese press dropped a bombshell on Renault-Nissan this morning, revealing that Carlos Ghosn had been arrested and was being heard by the Japanese justice on the ground of fiscal fraud. More importantly, the initial investigation appears to have come from Nissan itself. The company reported this morning that Mr Ghosn, chairman of Nissan but also chairman and CEO of Renault and chairman of Mitsubishi Motors had indeed under-reported his income over several years in the company’s securities reports and had made personal use of some company assets. The impact of Mr Ghosn’s arrest could be significant, as he still has a pivotal position into the alliance structure and concentrates the bulk of strategic decision making in his hands. The situation creates the risk of looser ties between the car-makers and notably more independence from the Japanese side to the detriment of Renault, whose industrial scale has been built on the synergies it extracts from the alliance. It could undermine the group’s long-term strategy at a time when the industry is focusing on challenges such as electric vehicles and autonomous driving. If one could argue that the 18bps move wider of Nissan’s risk premium to 55bps move was relatively bigger than Renault’s 27bps move wider at 150bps, investors seemed more preoccupied by the French constructor’s situation.