Nissan chief Carlos Ghosn 'under-reported salary'
Nissan Motor Co chairman Carlos Ghosn has been arrested for alleged financial misconduct and will be fired from the board this week.
Nissan Motor Co chairman Carlos Ghosn has been arrested for alleged financial misconduct and will be fired from the board this week, a dramatic fall for a charismatic leader hailed for rescuing the Japanese car-maker from close to bankruptcy.
Ghosn is also chairman and chief executive of Nissan's French partner Renault and one of the best known figures in the global car industry.
While the news took the automotive and investment by storm, Morningstar senior analyst Richard Hilgert has kept his fair value estimates for both Nissan and Renault intact, saying it was alarmist to suggest that Ghosn's arrest would lead to the fall of the alliance.
Nissan said an internal investigation, triggered by a tip-off from a whistleblower, revealed Ghosn engaged in wrongdoing including personal use of company money and under reporting for years how much he was earning.
Carlos Ghosn was hailed as a superstar in Japan for reviving Nissan
Nissan chief executive Hiroto Saikawa said too much power had been concentrated on Ghosn, a rare foreign executive who enjoyed corporate superstar status in Japan for reviving the ailing Japanese brand.
"Looking back, the concentration of power was something we need to deeply reflect on," he said, confirming the arrest of Ghosn in Japan on Monday.
Saikawa said he could not give specifics on the personal use of company money, but said the wrongdoing was serious and unacceptable and had gone on for years. Ghosn could not be reached for comment.
"To have so greatly violated the trust of many, I feel full of disappointment and regret," Saikawa told a news conference.
"It is very difficult to express this ... It's not just disappointment, but a stronger feeling of outrage, and for me, despondency."
French President Emmanuel Macron said the government, the French car-maker's top shareholder, would be vigilant about Renault and its alliance with Nissan.
Saikawa said he would propose at a board meeting on Thursday to remove Ghosn.
Fair value intact despite shockwave
Despite being shocked by the news, Morningstar's Hilger said there was little cause so far to alter the fair value rating for Nissan or Renault.
"For now, we have little information that would cause us to change our JPY 1480 fair value estimate for the shares of Nissan or our EUR 88 fair value estimate on the shares of Renault," Hilgert said.
"If the removal of Ghosn and his management team results in substantial changes in alliance group ownership, our fair value estimates for Renault and Nissan may need to be adjusted.
However, we think there is less than a 25 per cent probability that the alliance would disband.
Headline risk to valuation will be high in the near term, but for patient long-term investors, we view the shares of Nissan and Renault as attractively valued with 4-star ratings.
Le Cost Killer
Known as "Le Cost Killer" for overseeing turnarounds including cuts at Renault, Ghosn has remained popular in Japan despite the massive job cuts that he brought and recent controversy over his lucrative pay package.
Japanese media reported that Ghosn had reported around 10 billion yen (about $A120 million) worth of annual compensation as about 5 billion yen for several years.
Ousting Ghosn, 64, is bound to raise questions about an alliance that he personally shaped and had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.
Renault owns 43.4 per cent of Nissan, while Nissan owns 15 per cent of Renault, with no voting rights in a partnership that began in 1999. Since 2016, Nissan has held a 34 per cent controlling stake in its smaller Japanese rival, Mitsubishi.
The Asahi newspaper reported on its website that prosecutors had begun searching the offices of Nissan's headquarters and other locations on Monday evening.
Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at Michelin in France, moving on to Renault. He joined Nissan in 1999 after Renault bought a controlling stake and became its CEO in 2001. Ghosn remained in that post till last year.
In June, Renault shareholders approved Ghosn's 7.4 million euros ($11.6 million) compensation for 2017. In addition to this, he received 9.2 million euros in his final year as Nissan chief executive.
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Lex Hall is content editor, Morningstar Australia
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