Nissan board dismisses Carlos Ghosn as chairman

The company's board ousts George Kelly who was also arrested earlier this week

Japan's national broadcaster NHK breaks the news of Carlos Ghosn's dismissal as chairman of Nissan by the company's board members.

The board of Nissan, the Japanese automaker which is part of the world's largest car manufacturing alliance, dismissed Carlos Ghosn as chairman and replaced him with his protege and chief executive Hiroto Saikawa as interim head.

Mr Ghosn's dismissal as chairman and representative director as well as the removal of George Kelly, another board member was taken by unanimous vote, Nissan said in a statement late Thursday.

"At the beginning of the session, the board acknowledged the significance of the matter and confirmed that the long-standing alliance partnership with Renault remains unchanged and that the mission is to minimize the potential impact and confusion on the day-to-day cooperation among the alliance partners," Nissan said.

Board members voted to "study the creation of a special committee to appropriately take advice from an independent third party regarding the governance management system and better governance of director compensation." Three independent directors Masakazu Toyoda, Keiko Ihara and Jean-Baptiste Duzan will lead this matter.

The board also approved the establishment of an advisory committee chaired the independent directors that will propose nominations from the board of directors for a new chairman of the board.

The announcement by Nissan came after hours of deliberation by board members and was first reported by Japan's national broadcaster NHK.

Shin Kukimoto, the deputy public prosecutor at the Tokyo District Public Prosecutors Office, declined to comment on whether Mr Ghosn had admitted to allegations of financial misconduct. However, Mr Ghosn, who ruled over the Yokohama-based company for the past two decades, may face 10 years in prison if convicted of violating Japanese law and a fine of up 10 million yen, the prosecutor told media. Mr Ghosn is reportedly getting eight hours of sleep, three meals and 30 minutes of exercise, according to prosecutors.

Mr Ghosn, 64, who has been at the company since 1999 and is widely credited for rescuing it, was arrested earlier this week on allegations of under reporting his earnings by about $44 million and using company resources to acquire homes in Amsterdam, Paris, Rio De Janeiro and Beirut. His lawyer is a former prosecutor.

The Japanese carmaker Mitsubishi, which is part of the alliance with Nissan and France's Renault, said it is postponing its board meeting to decide the fate of Mr Ghosn until next week. Renault has tasked its chief operating officer Thierry Bollore to run the company in the interim and adopted a wait and see approach. The French company has requested Nissan share the evidence against Mr Ghosn. The French government has a 15 per cent stake in Renault and is the largest shareholder in the company. Renault owns about 43.4 per cent of Nissan.

Japanese and French media reports have alluded to a potential power struggle inside Nissan prompted by a fear that Renault would take over the alliance and dominate Nissan.

"Rather than a coup d’etat, this shows we had reached the limits of putting up with him," Asahi newspaper cited a Nissan executive as saying on Thursday. “While I believe Ghosn was an outstanding corporate manager, I felt he left much to be desired as a human being. We cannot talk about him while ignoring that aspect.”

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Nissan paid about $100,000 a year to the older sister of Mr Ghosn for advisory work that began in 2002, according to an in-house investigation by the carmaker, Asahi reported citing unnamed company sources. Mr Ghosn’s older sister received about $1.7 million from the automaker, the newspaper said. Nissan officials began investigating Mr Ghosn after a whistle-blower tipped them off, the company said earlier this week.

Mr Ghosn, a Brazilian-French citizen of Lebanese origin, was arrested along with Mr Kelly on Monday. Mr Ghosn was detained after turning himself in to prosecutors upon arriving at Japan’s Haneda airport on a corporate jet. Under Japanese law detainees can be held for 23 days for questioning.

Shares of the three companies tumbled on news of the scandal but began to stabilise on Wednesday. Nissan shares closed 0.78 per cent up at the end of trading in Tokyo, while Mitsubishi shares gained 0.15 per cent. Renault shares were down 0.53 per cent at 03:44pm Abu Dhabi time.

The three companies are slated to produce 11 million cars this year.