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The custody of Carlos Ghosn extended for a further 10 days

The custody of Carlos Ghosn extended for a further 10 days

This high-profile of the automobile industry was arrested Monday, Nov. 19, in Tokyo. Carlos Ghosn is detained as part of his custody. Instagram.

THE FALL. The titan of the car industry Carlos Ghosn was arrested Monday in Japan for suspicion of tax evasion. On Wednesday, Japanese court extended the custody of Mr. Ghosn for an additional 10 days, while Renault's board has decided to keep him as Chairman and CEO of the company until further notice.

By The Daily View ...
Created : Nov. 21, 2018, 11:09 AM - Modified : Nov. 21, 2018, 2:16 PM

Reactions in the financial markets were not long in the earthquake announcement on Monday that the world's top automaker Carlos Ghosn was arrrested for suspicion of tax fraud. 

A video broascast on Tuesday by the popular Japanese daily newspaper Asahi Shimbunshows a corporate jet transporting Carlos Ghosn in the Haneda Airport in Tokyo on November 19 with a cohort of agents of the special investigation unit of the prosecutor's office boarded in order to arrest him.

On Wednesday, Japanese court extended the custody of Carlos Ghosn for an additional 10 days, giving prosecutors more time to question him over alleged financial wrongdoing, while the French government said it was still waiting for evidence to back up the allegations.

The big boss of the Nissan-Renault group was taken into custody in Kosuge detention center in the suburb of Tokyo, where he spend his second night on Tuesday while he is interrogated.

In Japan, conditions of custody are very spartan. Inmates are entitled to a futon in their cell and for their meals, they must be content with three bowls of rice a day, according to the French radio station RTL.Carlos Ghosn is entitled to preferential treatment: he does not have to share his cell. 

The shock wave was immediate. Nissan and Mitsubishi shares plunged Tuesday while Ghosn was still being held by Tokyo prosecutors. 

Nissan shares dropped 5.5 percent in Tokyo and Mitsubishi was 6.8 percent, while in Paris it was down 1.4 percent after tumbling 8.4 percent on Monday.

 $44.5 million under-reported

French and Japanese officials immediately wanted to reassure Tuesday the investors about the stability of the Nissan-Renault-Mitsubishi alliance in the face of the alleged facts of its chairman who reportedly failed to report all of his salary from Nissan and inappropriately use of the company's assets.

Japanese prosecutors have said that it is being held under suspicion of under-reporting the five billion yuan ($ 44.5 million) he won over five years.

Twenty-four hours after the shock wave caused by his arrest, the chairman of the alliance is now off the road. Nissan's board has already said it will seek to be of the alliance automaker.

"Strong support" 

Renault, in its first official reaction, said that it was "particularly focused on the consolidation of the Renault Nissan Mitsubishi alliance," and that its board would meet later Tuesday.

Following a meeting of the board of directors, Renault’s board has decided to keep Carlos Ghosn on as Chairman and CEO of the company until further notice. His number two Thierry Bolloré will take over the management of the French car manufacturer during this time.

In a statement Tuesday, French Finance Minister Bruno Le Maire and his Japanese counterpart Hiroshige Seko reaffirmed their "strong support" for "one of the greatest symbols of Franco-Japanese industrial cooperation."
 
Renault and Nissan rescued
 
The three companies have deeply enmeshed their operations to produce huge economies of scale, and Renault owns 43 percent of Nissan while Nissan has a 15 percent stake in its French counterpart.
 
Yet Nissan is the bigger player in the alliance, racking up sales of 12 trillion yen ($106 billion) last year compared to Renault's 59 billion euros ($67 billion).
 
The 64-year-old Ghosn executive credited with rescuing both Renault and Nissan and then fusing them into a behemoth which sold 10.6 million cars last year.
 
A whistleblower 
 
Nissan CEO Hiroto Saikawa said a months-long investigation prompted by a whistleblower had uncovered years of financial wrongdoing, including the misuse of company assets.
 
Public broadcasterNHKreported that Nissan had provided Ghosn with houses in four countries "without any legitimate business reason," paying "huge sums" for residences in Rio de Janeiro, Beirut, Paris and Amsterdam.
 
Nissan's representative director Greg Kelly, who was arrested along with Mr. Ghosn, reportedly ordered other executives to "hide salaries", the Yomiuri Shimbun said.
 
In France, Le Maire said officials had found no evidence of wrongdoing by Ghosn, though the government has clashed with him before over what it termed "excessive" pay. The French state owns 15 percent of Renault and 22 percent of its voting rights.
 
A trap ?

Could the dramatic fall of Ghosn hide anything like a trap set by the Japanese group against his savior?

Rumors of the merger of the original duo born in 1999 had beaded in the Japanese press for a few months and caused some resentment in the country. 

A merger project would have had the effect of further strengthening the power of Renault and its mega boss. Renault owns 43% of Nissan, which owns 15% of the diamond group.

So many frictions that came to light when Nissan CEO Hiroto Saikawa, accused him of increasing power, even qualifying Carlos Ghosn as "brain of the combine." 

"Greedy"

"Too much authority is given to one person in terms of governance," Saikawa told reporters at Nissan's headquarters. "I have to say that this is a dark side of the Ghosn era which lasted for a long time."

The Yomiuri Shimbun on Tuesday quoted Nissan executive slamming Ghosn as "greedy".

"He says the right things, but in the end it's all about money," the daily quoted an unnamed senior employee as saying.

The imposing boss known for his authoritarian decisions won nearly $ 17 millions a year which is more than 7 times more than A Toyota's CEO. Ghosn's incomes are critisized by Renault's unions in France as well.

A desire for emancipation 

The economic daily Nikkeisaid on Tuesday that after years of silent acceptance,"there was growing criticism in Nissan about the excessive remuneration of Carlos Ghosn".

This division within the alliance led since 1999 by the French-Lebanese-Brazilian iron man could also be explained by a desire for emancipation of Nissan and for Japan, to end with redemptions of companies within the archipelago.

If only intended to bring to light serious errors of his all-powerful CEO, this arrest arises at the right time for critics of one of the most powerful leaders in the world. 

 

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