In today’s newsletter, we talk about the former CEO of Nissan, Carlos Ghosn and his incredible story that’s making headlines everywhere.

The Story

When Ghosn took over Nissan in the late ‘90s, the Japanese automaker was in a state of shambles. The company had been struggling with its finances. The debt burden was spiralling out of control. Innovation had taken a backseat and they were ceding market share to the likes of Ford, General Motors and Toyota. They needed a massive handout if they had any hopes of surviving, let alone competing. While there were a few suitors initially, most dropped out after baulking at the $16 billion debt burden Nissan was carrying with it. Until the french auto company, Renault finally decided to set up.

The premise was simple. Renault takes over $5 Billion of Nissan’s debt in exchange for about 35% of the company. The two companies enter into an alliance and try to feed off each other strengths. Once the deal was cast in stone, Louis Schweitzer, then CEO of Renault, tasked Carlos Ghosn to lead the turnaround at Nissan. And Ghosn did not disappoint.

Consider, for instance, the dismantling of the Keiretsu system. Ghosn quickly found out that Nissan wasn’t cash strapped because they didn’t have any money. No, they were cash strapped because they had billions of dollars tied up in other companies under the Keiretsu system. Under the elaborate business scheme, the automaker bought a small equity stake in their partner companies so that the investment could foster loyalty and cooperation. However, oftentimes, it did neither.

As Ghosn himself writes “ One of Nissan’s investments was a $216 million stake in Fuji Heavy Industries, a company that, as the manufacturer of Subaru cars and trucks, competes with Nissan. What sense did it make for Nissan to tie up such a large sum of money in just 4% of a competitor when it could not afford to update its own products? That was why, soon after I arrived, we started dismantling our Keiretsu investments. Despite widespread fears that the sell-offs would damage our relationships with suppliers, those relationships are stronger than ever. It turns out that our partners make a clear distinction between Nissan as customer and Nissan as a shareholder”.

Anyway, he didn’t stop at this. He began implementing a cost-cutting program. He prioritised performance over seniority. There were some cultural changes. Layoffs became commonplace. But at the end of it all, Nissan was on a path to profitability. In fact, the turnaround was so successful that Ghosn became the stuff of legends. However, it also became evident that Ghosn’s ever-increasing influence began ruffling some feathers at Nissan.

The overwhelming perception was that power, authority and prestige remained disproportionately on the side of Renault, so long as Ghosn was at the helm. This despite the fact that by 2010, Nissan was doing much better (financially) than Renault. However, considering Renault still held a controlling stake in the company, there wasn’t a lot, Japanese executives could do about the situation.

Post-2010, Ghosn further reinforced the idea of integrating the two companies more tightly. The Japanese felt this was a direct threat to their autonomy. Renault executives contested that this was a way of streamlining operations so that both companies could be better equipped to deal with the future.

But it's safe to say the Japanese didn’t take kindly to this development and rumour has it that top Nissan executives began hatching a plan to oust Ghosn from the company. When the tensions became apparent, Ghosn tried to quell the unrest by resigning as Nissan CEO and taking over the chairmanship. But that didn’t help either.

And on 19th Nov 2018, Ghosn was finally arrested in Tokyo on charges of financial impropriety. Some say that the prosecutors were fed with important details by Nissan executives themselves. But soon enough, US and French authorities also began uncovered some pretty incriminating stuff when digging through his financial transactions.  So it's safe to say that Ghosn wasn’t exactly the knight in shining armour everyone thought he was.

Long story short. The Japanese put him in a detention center. Held him there for a while. And when he finally made bail, kept him on house arrest.

The status quo would have prevailed if it weren't for one small detail. Ghosn somehow managed to escape. Yeah, that’s right. Yesterday, Carlos Ghosn appeared in Lebanon and said this — “I have escaped injustice and political persecution”

The man actually fled the country. Wow!!

Now nobody knows for sure how he escaped. But the story goes that Ghosn smuggled himself out of Japan in a musical instrument case. Once at the local airport, he apparently sneaked into a private plane, made his way to Istanbul before finally entering Lebanon a couple of days back. It's a bold escape. You have to give him that.

Now bear in mind, Japan and Lebanon don’t have an extradition treaty in place. Which means he might never face trial in Japan again. But that also puts the Nissan-Renault partnership at stake now. Will the friction break the alliance or will a new successor emerge?

You tell us. Let us know on Twitter.

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