Carlos Ghosn, chairman of the alliance between Nissan Motor Co., Renault SA and Mitsubishi Motors Corp., was arrested Monday on suspicion of violating a financial law.
Earlier in the day, the Tokyo District Public Prosecutor’s Office had questioned the 64-year-old executive on suspicion of underreporting his income, investigative sources said.
Along with Ghosn, Tokyo prosecutors also arrested Nissan Representative Director Greg Kelly over the same allegation, the sources said. Together, the amount of their underreporting amounted to some ¥5 billion over five years between 2011 and 2015, they said.
Nissan issued a statement saying that based on a whistleblower report, the company has been conducting an internal investigation over the past several months regarding misconduct involving Ghosn and Kelly.
“The investigation showed that over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn’s compensation,” it said.
“Also, in regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.”
Attending a hastily arranged news conference, Nissan CEO Hiroto Saikawa apologized for the trouble caused by the chairman long seen as the face of the automaker.
“We cannot go into details today, but we have confirmed that this matter is totally unacceptable as a company. Experts have also said this misconduct is grave enough to relieve (Ghosn and Kelly) from their posts,” Saikawa said.
“We are deeply sorry and regret the betrayal of trust of various related people, shareholders and suppliers who have supported us for many years because Ghosn was leading Nissan,” he said.
Nissan has been providing information to prosecutors and has been cooperating fully with their investigation, Saikawa said.
He said he will propose to Nissan’s board of directors Ghosn be removed from his positions as chairman and representative director as well as Kelly from his position as representative director on Thursday.
Tokyo prosecutors began searching Nissan’s headquarters in Yokohama on Monday night.
Ghosn’s reported salary from last year fell by some 33 percent from 2016, to ¥730 million — the first time in four years that his salary had not stretched into at least ¥1 billion.
In 2016, his salary was ¥1.09 billion and in 2015 he received ¥1.07 billion.
After the news broke, Renault shares took a nosedive on the European market, briefly dipping more than 10 percent compared with Friday’s closing.
The arrests of Nissan’s two top executives sent a shock wave through the general public.
Interviewed by The Japan Times on Monday evening, Toru Takahashi, a public official from Tokyo who was testing Nissan cars at the firm’s Yokohama headquarters, said, “I’m worried about the company’s future.”
“If I were considering buying a Nissan car now, I’d probably have second thoughts” in the wake of this scandal, he said.
Analyst Takuro Morinaga was quick to point out that Ghosn stayed at Nissan’s helm “for just too long.”
“The rich crave more money no matter how much they earn,” he said. “If his arrest charge is true, that would mean he held absolute power for just too long, to the extent that it corrupted him.”
Ghosn, a rare foreign top executive inJapan, is well-regarded for turning Nissan around from near bankruptcy.
Ghosn is one of the best-paid executives among Japanese companies, a fact that has often been a target of criticism.
He came to Nissan in 1999 as chief operating officer to lead the carmaker’s turnaround under a capital alliance with Renault.
Becoming president of Nissan in 2000, he spearheaded a recovery with plant closures and other drastic restructuring measures, shocking the Japanese business community and giving him a reputation as a cost-cutter.
His management style stood out as he set numerical “commitment” targets and carried out aggressive reforms.
Under his tenure of nearly two decades, Nissan moved away from conventional practices in the Japanese auto industry. For instance, it negotiated aggressively with steel-makers to lower steel sheet purchase costs, triggering fierce competition among major steel mills.
In the first half of 2018, the alliance formed by Nissan, Renault and Mitsubishi Motors became the world’s largest auto seller, outselling major rival Volkswagen in a neck-and-neck race.
The alliance sold 5.54 million vehicles worldwide in the first six months of 2018, up 5 percent from the same period last year, according to data from the three companies.
The figure outstripped the 5.52 million vehicles sold by the Volkswagen group, which grabbed the top spot in global sales for the second straight year in 2017. The group includes the Audi and Porsche brands.
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