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Can the Renault-Nissan alliance survive without Carlos Ghosn?

Since Ghosn's arrest, shares in both Nissan and Renault have sunk by one-third, and sales in the U.S. have fallen by almost 8 percent.
Image: Carlos Ghosn
Carlos Ghosn staged a daring escape from Japanese custody last month, fleeing to Lebanon, where his parents were born and he has residency.Yoshikazu Tsuno / AFP - Getty Images

When Renault invested over $5 billion in 1999 to bail out then-floundering Nissan, it was one of the more audacious moves in postwar automotive history.

One rival, scoffing at the idea, suggested the French automaker might better load a barge with gold and “sink it in the middle of the Atlantic Ocean.” Yet, the deal quickly confounded critics and, just three years ago, with Mitsubishi joining in, what had begun as the Renault-Nissan Alliance became one of the world’s three best-selling automotive groups, challenging established rivals such as Toyota and Volkswagen.

Now, however, the alliance is in shambles, with some analysts and company insiders even questioning the viability of the three automakers individually. To longtime observers, one man, Carlos Ghosn, was behind the unlikely success of the French-Japanese partnership — and that same man could be the cause of its unraveling.

The Brazilian-born executive, appointed by Renault to oversee its investment, “Was able to do things the Japanese culture wouldn’t have allowed, like closing plants and cutting the Nissan workforce,” said David Cole, director-emeritus of the Center for Automotive Research. “It saved Nissan, but (the company) hated him for it.”

The payback, Ghosn claims, came when he was arrested on Nov. 19, 2018, after his corporate jet landed in Tokyo. Facing an assortment of corruption allegations, Ghosn was locked up for most of the following four months in a tiny, unheated Tokyo cell, eventually released under bail and close scrutiny. In an audacious move, the 66-year-old executive escaped Japan last month, fleeing to Lebanon, where his parents were born and he has residency.

However Ghosn’s personal saga plays out, industry watchers see no chance he’ll return to the Renault-Nissan-Mitsubishi Alliance, leaving those who succeeded him struggling to figure out how to put things back together.

The alliance is critical to all three manufacturers, executives are quick to say, putting a positive spin on efforts to fix long-simmering problems that came to the fore after Ghosn’s arrest. The alliance is “extraordinarily positive,” Renault Chairman Jean-Dominique Senard told CNBC on Wednesday. “We are now shaping up the whole thing in a way that we can only have positive news in the near future,” Senard added.

But there are plenty of skeptics. They point to a variety of issues, especially Renault’s interest in formally merging the two companies. They’ve remained independent, despite their financial and functional ties. But Renault’s 43 percent stake has allowed it to directly impact what its Japanese partner does. Nissan, with a 15 percent stake in the French company, has relatively little influence.

One automotive veteran, with long and deep ties to Nissan in both Japan and the U.S., told NBC News there is a very real possibility the alliance will collapse. “Without Ghosn there to force the issue through, it will never happen. It’s an unnatural act.”

When things between the two automakers did appear to be working, the apparent payoff was substantial. Both companies ran solidly in the black, with Nissan rivaling some of the most successful luxury manufacturers using such metrics as returns on investment. Alliance synergies saved the carmakers $6.3 billion in 2017, according to the company, a figure forecast to top $11 billion by 2022.

That is clearly questionable now, as their declining results make clear. Individually, their stock prices have sunk by one-third since Ghosn’s arrest and sales in the U.S. alone have fallen by almost 8 percent. Ghosn’s successor, Hiroto Saikawa, axed 5 percent of Nissan’s global workforce last summer, slashing 12,500 jobs.

In a series of statements since the crisis began, Saikawa tried to blame his mentor for many of Nissan’s problems. But in an ironic development, Saikawa was forced out late last year when it was revealed he had not reported all of his income, the original issue for which Ghosn was arrested. While Saikawa was not charged, he has agreed to return his excess pay.

Makoto Uchida, the current CEO of Nissan, is struggling to untangle the litany of problems. Last month, Vice Chief Operating Officer Jun Seki, the man designated hands-on manager of Nissan’s turnaround plan, unexpectedly resigned, adding to the automaker’s turmoil.

What happens if the Renault-Nissan-Mitsubishi Alliance does collapse is uncertain. Ironically, the French automaker seemed ready to craft an alternative when, last spring, it entered into merger talks with Fiat Chrysler Automobiles. The deal seemed ready to go when, in a further irony, the French government, worried about how Nissan would react, applied the brakes, and FCA pulled out.

The Italian-American automaker has since entered into merger plans with Renault’s French arch-rival, the PSA Group. That deal would create the world’s fourth-largest automaker by sales — and put more pressure on both Renault and Nissan to work out their differences.