Will Nissan/Renault alliance run out of road?

Cantillon: Questions circle car giants’ link after Carlos Ghosn’s fall from grace

Known as "Le Cost Killer", Carlos Ghosn became a corporate superstar for reviving the fortunes of failing household car brands. The globe-trotting car boss is credited with rescuing both Renault and Nissan, but also as one of the few executives who mastered the cross-cultural minefield to be accepted inside Japan's cloistered corporate world. So much so that his life has been serialised in a popular comic book in Japan.

His arrest on Monday, over claims of financial misconduct, has rocked the automotive world to its core.

While Nissan said it plans to sack Ghosn at a board meeting on Thursday, he currently heads up an alliance of Nissan, Renault and Mitsubishi Motors, and is in charge of 470,000 employees.

Known for criss-crossing the globe on his corporate jet, attending boardroom meetings in Tokyo one day and Paris the next, the Brazilian-born Ghosn is of Lebanese descent with French citizenship. He once said his background gave him a unique ability to tackle the inevitable cultural clashes in the international corporate world.

Emissions scandal

Speaking on Monday, Nissan's recently appointed chief executive Hiroto Saikawa said too much power had been concentrated on Ghosn, creating major issues with corporate governance. That's a wider problem across the auto industry. Volkswagen Group suffered from a similar issue, ultimately resulting in its global emissions scandal.

The question now is whether his Japanese-French alliance will start to unravel. As chairman and chief executive of Renault, his arrest also has political ramifications as the French government is Renault’s major shareholder.

In Japan, there may be a temptation to turn inwards and return to more localised corporate traditions.

Technological revolution

This would be a mistake. The motor industry is hurtling towards a technological revolution, with autonomous cars, electric power and car-sharing all potential pitfalls for the current motor giants.

New rivals are coming on to the road from tech companies, many of them free of the historic baggage of deals with unions and national governments that tie down established players.

Ghosn had a good handle on the tech challenges. Despite his cost-cutting reputation, he wasn’t afraid to invest heavily in research and development leading, for example, to the introduction of affordable electric cars like the Nissan Leaf.

Abandoning the alliance between the European and Japanese brands would be short-sighted. It would also be a godsend to rivals, both inside and outside the auto industry.