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Economy & Business

Arrest Of Nissan Chairman Threatens Future Of Alliance With Mitsubishi And Renault

AUDIE CORNISH, HOST:

One of the auto industry's most prominent executives was arrested today in Tokyo. Nissan chairman Carlos Ghosn is accused of hiding part of his financial compensation from Japanese regulators. He's expected to be fired later this week. NPR's Jim Zarroli has more.

JIM ZARROLI, BYLINE: Nissan's head Ghosn received about $89 million over the past five years but only reported about half of it to the government. Another executive was accused of helping him hide his income. The company said it has been conducting an internal investigation into misconduct by Ghosn. Still, the news took a lot of people by surprise. Michelle Krebs is an industry analyst at AutoTrader.

MICHELLE KREBS: Utterly shocking and also sad - this is a man who had an incredible legacy to leave behind, and he's ending on a very sour note.

ZARROLI: Krebs says Ghosn was one of the auto industry's big thinkers - provocative and colorful, a frequent guest at Davos. He was a big backer of electric cars. Born in Brazil to a family of Lebanese descent, Ghosn became chairman of the French carmaker Renault. In the 1990s, he formed an unusual alliance between Renault and the struggling Japanese company Nissan. Mitsubishi later joined as well. Here was Ghosn speaking at Stanford in 2010.

(SOUNDBITE OF ARCHIVED RECORDING)

CARLOS GHOSN: When I arrived in Japan 1999, one of the reasons for which Nissan was in trouble is there was lots of decisions, which needed to be taken five years ago, were not taken.

ZARROLI: Ghosn embarked on an unusual austerity program. He started doing things that weren't common in Japan, like laying off employees and shutting down factories. Analyst Jeremy Acevedo, at Edmunds, says Ghosn...

JEREMY ACEVEDO: Really cut the fat to make the company very lean and was able to turn a profit very rapidly for Nissan - it really is a really remarkable turnaround.

ZARROLI: The alliance Ghosn formed sold more than ten and a half million cars last year - more than any single company. Ghosn's success made him something of a folk hero in Japan. There was even a comic book published about him. But Michelle Krebs says he was also controversial.

KREBS: Japanese executives don't make anywhere near the money that American executives do, for example. And Mr. Ghosn was extremely well paid, and that had caused a lot of resentment.

ZARROLI: It was that high salary that Ghosn allegedly tried to hide. Nissan says it will hold a board meeting on Thursday where it's expected to fire Ghosn. Acevedo says it's a big loss for the company at a time when auto sales have peaked.

ACEVEDO: Having Carlos Ghosn - really one of the most visible and high-profile CEOs in the industry - now leaving the company, it's challenging for Nissan to, I think, navigate.

ZARROLI: One of the challenges Nissan faces is deciding what its relationship should be with the other two companies in the alliance now that the man who was so central to it is leaving. For now, Ghosn remains chairman of Renault, which says it's looking into the allegations. Renault owns a large share of Nissan, and it says it wants to protect the stability of the partnership. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.