Coup or Crime? The Case of Carlos Ghosn Custom Case Solution & Analysis

Evidence Brief: Business Case Data Research

1. Financial Metrics

• Ownership Structure: Renault holds a 43.4 percent controlling stake in Nissan with full voting rights. Nissan holds a 15 percent stake in Renault with zero voting rights under French law.
• Alleged Misconduct: Japanese prosecutors charged Ghosn with under-reporting compensation by approximately 9.2 billion yen (80 million dollars) over an eight-year period.
• Asset Misappropriation: Allegations include the use of 18 million dollars in company funds to purchase and renovate private residences in Rio de Janeiro and Beirut.
• Stock Performance: Following the arrest on November 19, 2018, Nissan shares fell 11 percent in Tokyo trading, while Renault shares dropped 8 percent in Paris.
• Operating Margins: At the time of the crisis, Nissan operating margins were declining, dropping from 6.3 percent in 2016 to 4.3 percent in 2018.

2. Operational Facts

• Production Scale: The Alliance produced 10.6 million vehicles globally in 2017, making it the largest passenger vehicle group by volume.
• Geographic Footprint: Operations span 122 manufacturing plants across the globe with a combined workforce exceeding 450,000 employees.
• R and D Integration: The Alliance shared common modules and platforms (CMF), claiming billions in annual cost savings through joint purchasing and engineering.
• Governance Structure: Carlos Ghosn served simultaneously as Chairman and CEO of Renault, Chairman of Nissan, and Chairman of Mitsubishi Motors.

3. Stakeholder Positions

• Carlos Ghosn: Maintains that the arrest was a result of a coup orchestrated by Nissan executives to block a full merger that would have subordinated Nissan to Renault.
• Hiroto Saikawa (Nissan CEO): Publicly condemned Ghosn for concentrated power and financial impropriety, advocating for a more independent Nissan.
• French Government: Holds a 15 percent stake in Renault and pushed for a permanent, irreversible merger to protect French industrial interests.
• Japanese Ministry of Economy, Trade and Industry (METI): Historically protective of Nissan as a national champion; wary of French state influence over Japanese technology.

4. Information Gaps

• The specific internal audit findings from Nissan that triggered the whistleblower report remain confidential.
• The exact degree of knowledge the Renault board had regarding Ghosn’s compensation structure at Nissan is not documented.
• Detailed breakdown of the 5 billion euros in claimed annual savings from Alliance integration is not provided.

Strategic Analysis

1. Core Strategic Question

Can the Renault-Nissan-Mitsubishi Alliance survive as a functional entity given the collapse of trust between its primary partners and the fundamental asymmetry of its capital structure?

2. Structural Analysis

• Power Concentration: The removal of Ghosn reveals a structural failure where governance was tied to a single individual rather than institutional processes. The dual role across competing entities created irreconcilable fiduciary conflicts.
• National Interest Conflict: The Alliance is trapped between the French state desire for industrial consolidation and the Japanese desire for corporate sovereignty. This is a zero-sum game that prevents commercial optimization.
• Capital Imbalance: The 43.4 percent versus 15 percent (non-voting) stake is the primary source of friction. Nissan contributes more revenue and profit to the Alliance but lacks proportional governance influence.

3. Strategic Options

4. Preliminary Recommendation

Pursue a Rebalanced Partnership. The Alliance must move from a parent-subsidiary model to a true peer-to-peer structure. This requires Renault to reduce its stake in Nissan to approximately 15 percent to match Nissan’s stake in Renault, while granting Nissan voting rights. This sacrifice of control is the only path to prevent a complete exit by Nissan, which would be more financially damaging to Renault than the loss of the equity stake.

Implementation Roadmap

1. Critical Path

• Month 1: Stabilization. Appoint an interim Alliance Board with equal representation from Renault and Nissan, excluding all individuals directly named in the internal investigations.
• Month 2-3: Governance Overhaul. Abolish the dual-CEO/Chairman roles. Establish independent audit committees for the Alliance that report to both parent boards simultaneously.
• Month 4-6: Capital Rebalancing. Initiate the sale of Renault’s excess 28.4 percent stake in Nissan into a neutral trust or back to Nissan for cancellation, contingent on a new master agreement.
• Month 7-12: Operational Realignment. Renegotiate shared platform costs based on current volume contributions rather than historical mandates.

2. Key Constraints

• The Florange Law: French legislation that grants double voting rights to long-term shareholders (the French State) complicates any reduction in Renault’s power.
• Japanese Legal Proceedings: The ongoing criminal trial of Ghosn and Greg Kelly will continue to produce reputational volatility and internal leaks.
• Technology Ownership: Untangling intellectual property related to electric vehicle drivetrains and autonomous driving systems is a multi-year engineering challenge.

3. Risk-Adjusted Implementation Strategy

The plan assumes a cooperative Japanese government. If METI continues to back a Nissan exit, the implementation must pivot to a hard separation. To mitigate this, the Alliance must secure a binding commitment from the French State to cap its voting power in Renault as a gesture of goodwill to Tokyo. Implementation success depends on decoupling the criminal case against Ghosn from the commercial necessity of the Alliance.

Executive Review and BLUF

1. BLUF

The Renault-Nissan Alliance is currently a zombie organization. The arrest of Carlos Ghosn did not cause the crisis; it exposed a decade of unresolved structural inequality. Renault must immediately reduce its stake in Nissan to 15 percent to achieve parity. Failure to rebalance the power dynamic will lead to a messy, uncontrolled dissolution that will destroy 30 percent of Renault’s market value and leave Nissan isolated in an era of rapid electrification. The strategy must shift from Ghosn-led centralization to a distributed partnership of equals. Speed is the only defense against a total collapse of the joint manufacturing programs.

2. Dangerous Assumption

The analysis assumes that the Alliance still generates significant scale advantages in an EV-dominated market. If the shared CMF platforms are not adaptable to next-generation battery architectures, the cost of staying together exceeds the cost of separation.

3. Unaddressed Risks

• Talent Attrition: High probability. Key engineers at Nissan may defect to Toyota or Honda during this period of leadership instability, hollowing out the R and D value.
• Mitsubishi Exit: Medium probability. Mitsubishi Motors is the smallest partner and may seek a more stable Japanese partner if the Renault-Nissan conflict persists, further eroding volume scale.

4. Unconsidered Alternative

The team failed to consider a third-party merger. A radical but viable path involves bringing in a third major global partner—possibly a Chinese EV leader or a technology giant—to dilute both the French and Japanese government influence and provide a neutral path forward for the capital structure.

5. Verdict

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