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Here tale of corporate posturing and growth…. You will not believe the scale of personal reward. Renault had existed under the wing of the French Government for many, many decades, to the point it had lost its way with famously iffy products like the Renault 9 / 11 (look – my glove box is broken. OK, so I have to buy a new dash…. look my ‘monotrace’ front seats don’t work. OK, so I have to buy the same thing which will break again…) and Renault 21 (look – why is the smaller engine transverse yet the slightly bigger engine is longitudinal? OK. Just buy the damn car…. look, the interior is disintegrating. OK, I’ll just buy some new parts which will do the same….). Renault even stumbled into the U.S., buying AMC – which allowed Wrangler to finally have proper chassis engineering for the ‘TJ’, although this did not appear until 1996.

Things went so well Renault were losing 1 billion Francs per day by 1984. They could not pay the interest on the debt, let alone a single Franc of the debt.

The French Government intervened, and appointed a new leader Georges Besse in 1984, who immediately set about cost-cutting measures. In truth Renault needed to stop ignoring the advance of quality exemplified by Japanese vehicles, and realise people would only buy vehicles if they were not only capable of crossing the Sahara desert on virtually no fuel but also managed to manufacture interiors that worked for far longer than 30 seconds.

Revolution as disaster beckons

Incidentally, it was Georges Besse who was murdered by a terrorist group in 1986 – but the revolution was underway. His replacement, Raymond Lévy, initiated the biggest part of the turn-around: New vehicles. Starting with the tail end of the ‘old’ system Clio was followed by Megane I with it’s surprise Scenic ‘MPV’ (building on the flair of Espace at a much lower cost), Laguna I and more. In all spheres Renault went from back of the field joke to front-runner. Suddenly Renault had durability, quality and flair.

Partnership (and a failed attempt at marriage) with Volvo gave deeper understanding to vehicle safety. The very first Euro NCAP 5 star car was…. Yes….. the 2001 Renault Laguna II. I was working at Saab on the day of the announcement, and the telephone wires between Trollhattan and Volvo glowed red all day. How? Who? What!!!!

Louis Schweitzer continued the revolution in 1992, as Renault by now had cleared its debt and was ready for privatisation. The guidance of Georges Besse, Raymond Lévy and Louis Schweitzer was of the very best kind – pragmatic and clever. All knew that Renault was too small to survive alone, and it continued to seek an alliance with many companies to ensure long-term survival. For partners the Renault ‘offer’ was an ability to build low(er) cost vehicles with regular industry quality and real class defining design flair.

You see, if a company is behaving badly, is broke, and fixes itself thanks to incredible intellectual re-birth, it has credibility.

That sinking feeling

Nissan at the time of Renault’s re-birth went in the opposite direction. If the market receded, famously employees were re-deployed to sell cars, sweep streets, do community service – anything but laid off. The product line was steeped in famously high quality, but the whole company had stopped listening to its customers around the world. Nissan decided what was best, and that looked very much like brown nylon slacks for all.

No flair.

No design.

Just bland.

Sales went south, to the extent that Nissan was in very real trouble. Just three model lines out of 46 made any profit. Discussions with Daimler had stalled, but Louis Schweitzer helped position Renault to sign an Alliance with Nissan on 27th March 1999. The main architect of the deal was Carlos Ghosn, who was Louis Schweitzer’s deputy. At the time of the Alliance, Nissan was effectively bankrupt – and Renault was not. So, Renault owned Nissan.

Carlos Ghosn was appointed Nissan Chief Operating officer by June 1999, became President of Nissan by June 2000 and CEO by June 2001 – whilst putting the ‘Nissan Revival Plan’ into operation. Gosh. Plants were closed. Product lines were deleted. The workforce was reduced. All of these things happened for the first time at Nissan – just as Renault, at the same time, got rid of the truck business to Volvo, and bus business to Iveco. The impossible became possible, as the two companies pragmatically sought to communise component usage and investments for the greater good of the Alliance. Key to this was sharing the Renault car platforms with Nissan.

Nissan did not go bust, but instead flourished. Renault, always the smaller part of the Alliance, undertook to ensure their long-term health with ever-deeper drives of internal efficiency, using Nissan as their guide.

Commercial success and old scores

One thing stuck in the throat at Nissan. Mr Ghosn was a foreigner, and it took a foreigner to haul Nissan out of the mud.

The bed rock of this corporate revival was all that hard work in the midst of ever-present threat of going bust, both for Nissan as well as Renault. Carlos Ghosn became President and CEO of Renault in 2005, thus effectively becoming chief of the Alliance. Business remained good, and the automotive world wondered if this solution could work for them.  AvtoVaz (at the insistence of Mr V Putin via the French Government), Samsung Motor and more joined the Alliance, and the power centred on Carlos Ghosn.

Tensions grew, especially when during the 2007 Renault bail-out the French Government insisted on a seat at the board. Whilst France regarded Renault as a national matter, they were far from unaware of the global reach of the Alliance. Nissan and the Japanese Government was less than pleased, seeking to re-balance the Alliance now that Nissan was demonstrably the largest partner. In 2017 Carlos Ghosn stepped down as CEO of Nissan, handing power to Hiroto Saikawa – but retaining the role of Nissan president.

The addition of the Mitsubishi automotive division to the Alliance in 2016 tipped the Japan centred part of the Alliance further away from Renault. Carlos Ghosn became the Chair of Mitsubishi, to assist in turning around the broken company – a company which fell out of alliance with Daimler, survived the loss of it’s truck division to Daimler and the scandal over global warranty issues.

Arrests and plots

Fast forward to the 19th November 2018. A private jet landed in Tokyo with Carlos Ghosn aboard, and before he could leave the aircraft he was arrested, and has spent months in gaol – only recently being released on bail.

On the same morning Nissan CEO Hiroto Saikawa held a press conference suggesting that Carlos Ghosn had done something ‘wrong’ – and events over the next few days led Nissan to claim Carlos Ghosn had hidden some of his multiple salaries to avoid paying tax. The primary motive was a two level power struggle – Japan Government and Nissan trying to oust the French Government from one of it’s premier automotive businesses, and an internal struggle to place Nissan beyond enforced integration with Renault. Nissan want the French government – a small but significant Alliance shareholder – out of the way. The Japan government would be quite happy to have Nissan at the helm of the Nissan-Mitsubishi Alliance with Renault / Dacia / Renault Samsung Motors / AvtoVaz  ‘junior’ league members.

The sticky subject of compensation means that because Carlos Ghosn was both President and CEO of both Nissan as well as Renault, corporate governance was perhaps not as robust as it should have been. In 2011 Carlos Ghosn received a total benefit of $5 million from Renault, and $8.7 million from Nissan ($13.7 million in total). This built steadily until 2015, when he received $8.3 million from Renault and $9.2 million from Nissan ($17.5 million in total).  In addition to this there were incomes from Mitsubishi after 2016, AvToVaz up to 2016, and selected non-automotive companies. The core accusation is that Carlos Ghosn sought to hide $43 million of previously undeclared income paid between 2011 and 2015 to avoid paying tax.

Then there’s troublesome satellite companies, such as Zi-A Capital BV set up by Nissan in 2010 and Renault Nissan BV set up in June 2017. The latter gained an employee ‘C Ghosn’ in February 2018 and paid that employee apparently €7 million without the knowledge of directors in the main businesses. The signees who set up this company as well as allegedly approved transactions included officers from Carlos Ghosn’s personal staff as well as Nissan CEO Hiroto Saikawa. Awkward.

What enabled corporate grumbling behind closed doors to burst into public was the ever more extravagant spending by Carlos Ghosn. His latest marriage, for example, was set in 2016 at Chateau de Versailles complete with all guests dressed in Marie Antoinette-themed costumes. This was not the only occasion of high-profile spending, and flies in the face of traditional corporate Japanese modesty. These actions just added to the underlying tensions to the gain of those who sought to remove Ghosn.

Nissan’s view on productivity  

In 2011 Carlos Ghosn launched the Power 88 plan, which aimed to give the Alliance an 8 per cent share of the global market with an 8 per cent profit margin. Notably, Nissan missed both goals.

Open disagreements with Nissan CEO Hiroto Saikawa surfaced when he publicly rejected the cost focused policies of his estranged boss, Carlos Ghosn during the press conferences after 19th November 2018. It seems Nissan wants to hide from economic reality, that Nissan should be a powerful player in the automotive world and yet is happy with sub-optimal performance. The Good Old Days, tail sliding back into the red.

On the 23rd November 2018 the Renault board agreed that the compensation paid by Renault to Carlos Ghosn between 2015 and 2018 was legal.

On the 29th November 2018 Nissan, Mitsubishi and Renault publicly supported continued involvement in the Alliance.

On the 24th January 2019 Carlos Ghosn resigned from Renault, as the French Government sought his release, on bail, from jail. The Japanese Government did not comply. The role is now split between Jean Dominique Senard (Chair) and Thierry Bolloré (Chief Executive Officer). However, Carlos Ghosn still retains some minor roles within Renault.

Nissan are calling for an extra ordinary shareholder meeting in April 2019 to formally remove Carlos Ghosn from the company.

Lessons learnt?

All too often knowledge from business growth in the midst of immense challenge is then lost as success changes the accounts from red to black ink. Nissan have completely forgotten it was Renault that hauled them out of corporate paralysis and near bankruptcy – the corporate arrogance is fully re-asserted, and the corporate paralysis is fully in action yet again. Dreary product after dreary product appears, including the shameful trashing of the ‘Datsun’ name stuck to products that have little or no design flair. Sales around the world are sagging, and the rise of ‘Nissan First’ is not helpful or productive – either for the Alliance or the company.

On a wider scale – and this is where the whole circus around Carlos Ghosn is meant to distract – Japan big business bent money (aka industrial scale corruption) is alive and well. The authorities in Japan who exist to police such matters continue to do very, very little.

Footnote: Throughout all my contributions to Automotive Refinisher South Africa I had a team member called Ace. Sadly, during prep for this article and after a short illness he has passed away, aged 11 years and 10 months. Editor’s note: Furry members of the team always inspire us with a wag and a snuggle at our feet to write with more compassion and inspiration. All important in the mix of life.

Auto Industry Consulting is an independent provider of technical information to the global collision repair industry via EziMethods, our online collision repair methods system. For more information please visit the website: www. ezimethods.com or contact ben.cardy@autoindustryconsulting.com

By Andrew Marsh