The shocking downfall of Carlos Ghosn could send the largest car company in the world into disarray

ETIENNE LAURENT/AFP/Getty ImagesRenault CEO Carlos Ghosn
  • Renault-Nissan-Mitsubishi Alliance chairman and CEO Carlos Ghosn was arrested by Japanese law enforcement on Monday.
  • Nissan revealed that an internal investigation concluded that Ghosn allegedly under-reported his income and misused corporate assets.
  • Nissan said it will dismiss Ghosn as its chairman.
  • Ghosn allegedly reported only half of the $US88.7 million he earned in a five year period ending in March 2015.
  • Ghosn is the mastermind behind the Renault-Nissan-Mitsubishi Alliance, which sold more than 10.6 million cars in 2017, the most of any carmaker in the world.

Renault-Nissan-Mitsubishi Alliance chairman and CEO Carlos Ghosn was arrested by Japanese law enforcement on Monday. The arrest comes after Nissan revealed that an internal investigation concluded that the long-time executive allegedly under-reported his income and misused corporate assets.

According to reports for Japanese media outlets NHK and Kyodo News, Ghosn allegedly reported only half of the $US88.7 million he earned in a five year period ending in March 2015.

In a statement, Nissan announced that CEO Hiroto Saikawa will ask the company board to remove Ghosn from his chairmanship.

At a press conference on Monday, the Nissan CEO said he felt “despair, indignation, and resentment.”

Saikawa, who served as Ghosn’s co-CEO at Nissan between November 2016 and March 2017, also bowed and apologised to the public

The Brazilian-born Ghosn also serves as the chairman of Mitsubishi Motors; chairman and CEO of Renault; and chairman and CEO of the Alliance, a carmaking unit consisting of Nissan, Renault, and Mitsubishi.

It’s unclear how his arrest will affect his positions with the Alliance.

The Alliance was not immediately available for comment.

Monday’s news marks a stunning downfall for an executive long-regarded as the man who saved Nissan nearly 20 years ago.

He is also the mastermind behind the Alliance, which sold more than 10.6 million cars in 2017, the most of any automaker in the world.

With Ghosn’s future as the Alliance’s leader in question, the conglomerate’s future also looks to be less clear than before right as the envisioned synergies of the venture begin to bear fruit.

“This benefits of the Alliance are finally coming into fruition,” Rebecca Lindland, a Kelley Blue Book executive analyst, told Business Insider. “There’s some platform sharing, technology from the new Nissan Leaf EV is going to go across several brands.”

In the hours after news broke of Ghosn’s alleged behaviour, both Nissan and Renault reaffirmed their commitment to the carmaking venture.

Read more: Nissan slides after Chairman Carlos Ghosn is arrested over financial misconduct allegations.

In a statement from Renault, a group of the company’s directors expressed “their dedication to the defence of Renault’s interest in the Alliance.” Saikawa also said during his press conference that the Alliance will not be affected by Ghosn’s ouster.

But there are still a lot of questions about how exactly the incident will impact the stability of the Alliance.

Shares of both Nissan and Renault took steep dives during Monday trading.

In a note released on Monday, Citi Group indicated that it does not foresee a dissolution of the Alliance.

“While unlikely, in our view, a drastic change to the status quo with Nissan could also result in a period of instability for the stock,” Citi said.

Carlos GhosnHarold Cunningham/Getty ImagesRenault CEO Carlos Ghosn poses next to the new Renault Scenic during the Renault press conference as part of the Geneva Motor Show 2016 on March 1, 2016 in Geneva, Switzerland.

Lindland agrees.

“Mr. Ghosn masterminded the Renault-Nissan-Mitsubishi alliance, balancing three different companies with demanding elegance,” the analyst said. “The alliance will continue without him, but this misconduct will cause disruption and uncertainty at the top for a while.”

However, expected a change in management style at Nissan and the Alliance.

“I think we could see a committee running the alliance,” Lindland said. “One of the things emphasised over and over at during Nissan’s press conference was the individual power that Mr. Ghosn held and I think that’s something Nissan and the Alliance will try to change in the future. “

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