French carmaker Renault tapped its chief operating officer and a senior board member to fill in for embattled boss Carlos Ghosn, after an investigation by alliance partner Nissan led to his arrest on suspicion of financial misconduct.
Thierry Bollore, Ghosn’s operational second-in-command, will become deputy chief executive, while lead independent director Philippe Lagayette assumes the function of interim chairman, Renault said after a board meeting late on Tuesday.
But the board refrained from firing Ghosn while awaiting more detail on the allegations - in a decision that could also buy more time for an accelerated, permanent succession process.
“Mr. Ghosn, temporarily incapacitated, remains Chairman and Chief Executive Officer,” Renault said in a statement. “During this period, the board will meet on a regular basis under the chairmanship of the lead independent director.”
Ghosn, one of the car industry’s best-known leaders, was arrested on Monday after Nissan said he had engaged in years of wrongdoing, including personal use of company money and under-reported earnings. The Japanese company plans to remove him as chairman on Thursday.
The French government, Renault’s biggest shareholder, had begun to distance itself from Ghosn, calling for new interim leadership before the meeting, as the Japanese investigation expanded to include Renault-Nissan alliance finances.
“Carlos Ghosn is no longer in a position where he is capable of leading Renault,” Finance Minister Bruno Le Maire said earlier in the day. “Renault has been weakened, which makes it all the more necessary to act quickly.”
Statements by Le Maire, Renault and its board all echoed French preoccupations over the future of the alliance first articulated by President Emmanuel Macron within hours of Ghosn’s arrest on Monday.
Following talks between Le Maire and his Japanese counterpart Hiroshige Seko on Tuesday, the ministers reaffirmed their “shared wish to maintain this winning cooperation”.
But in a sign that Nissan may now seek to loosen its French parent’s hold on the partnership, the Japanese company informed Renault it also had evidence of potential wrongdoing at Renault-Nissan BV, the Dutch venture overseeing alliance operations under Renault’s ultimate control, three people with knowledge of the matter told Reuters.
The private communication came from Nissan Chief Executive Hiroto Saikawa, whose company is 43.4 percent-owned by Renault in a complex alliance forged by Ghosn over almost two decades.
Close to bankruptcy when Renault bought its stake in 1999, Nissan has recovered to be the engine of an alliance that generates synergies for both companies and allows them to rival Volkswagen and Toyota Motor Corp on the global stage.
But there have long been tensions as Nissan, while almost 60 percent bigger than Renault by sales, remains the junior partner in their shareholding hierarchy with a smaller reciprocal 15 percent non-voting stake in Renault.
In its board statement, Renault invoked “principles of transparency, trust and mutual respect set forth in the alliance charter” to demand that Nissan provide “all information in (its) possession arising from the internal investigation.”
Renault shares closed 1.2 percent lower before the meeting, extending Monday’s decline of more than 8 percent. Nissan fell another 5.5 percent, while Mitsubishi Motors Corp, the third alliance member, ended down nearly 7 percent.
Mitsubishi Motors’ CEO Osamu Masuko said it could be hard to manage the alliance without the unifying figure of Ghosn.
“I don’t think there is anyone else on Earth like Ghosn who could run Renault, Nissan and Mitsubishi,” he told reporters in Tokyo.
Bank of America Merrill Lynch cut its rating on Renault to “neutral” from “buy”, while Exane BNP Paribas moved to “neutral” from “outperform”.
The end of Ghosn’s leadership poses questions and risks for an alliance he had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.
It comes at a difficult time for the industry, already grappling with tighter emissions regulations, a diesel sales collapse and big investments in electric and self-driving cars.
Ghosn’s alleged improprieties also raise questions over governance at the alliance, over which he presided relatively unchecked as chairman of all three partners’ boards.
Japan’s Nikkei business daily, citing unidentified sources, said Ghosn had received share price-linked compensation of about 4 billion yen ($36 million) over a five-year period to March 2015, but it went unreported in Nissan’s financial reports.
The financial reports also did not mention annual compensation of 100 million to 150 million yen Ghosn received from the automaker’s overseas subsidiaries, the newspaper said.
Nissan declined to comment on the report.
Japanese public broadcaster NHK also said Nissan had paid billions of yen to buy and renovate homes for Ghosn in Rio de Janeiro, Beirut, Paris and Amsterdam, citing unnamed sources. The properties had no business purpose and were not listed as benefits in compensation filings to the Tokyo bourse, NHK said.
There has been no comment from Ghosn on the allegations, and Reuters could not contact him for comment.
A French diplomatic source said the country’s ambassador in Tokyo had seen Ghosn on Tuesday as part of usual procedures for a French citizen being held in Japan. ($1 = 112.4400 yen)