(Bloomberg) -- As France braces for more protests over President Emmanuel Macron’s policies, one of the country’s leading corporations is getting ready for its own moment of truth.
Renault, the carmaker in which the French state is the most powerful shareholder, is headed into a decisive week about its leadership. While Carlos Ghosn may still formally be chief executive officer and chairman, his status has become increasingly tenuous as prosecutors in Japan close in on alleged financial digressions that led to his arrest last month.
Should he get charged next week, keeping Ghosn in the top job in France would create a dilemma for Renault’s board and the political elite: both owe gratitude to the charismatic car leader for advancing Renault’s interests, but over-stretching their support could easily backfire as France endures a violent uprising in the streets against some reforms.
“It’s hard to see how Ghosn can remain the leader of the alliance in the current context,” said Didier Heiderich, who runs a corporate crisis-management consultancy in Paris. “How would he be able to negotiate with unions after what happened?”
There are conflicting views inside the French camp on how to proceed, and how to interpret the actions of Nissan, the Japanese partner, which has emerged as the driving force behind Ghosn’s fast and furious downfall. The response back in Europe has been more cautious; unlike at Nissan, where Ghosn was swiftly removed from his post, Renault has nominally kept him in place pending further developments, saying more facts are needed before determining if the long-time leader of the car alliance acted out of line.
Within the Renault board, fault lines are emerging. Some members are pondering a more permanent solution than the stop-gap interim management team put in place after Ghosn’s arrest, a person familiar with the matter said. The hard-line CGT union, whose voice is represented by Richard Gentil on the panel, has been calling for a deeper change, arguing that Ghosn’s reputation is tainted.
With allegations against Ghosn, who was arrested on suspicions he under-reported his income, still murky, there is no guarantee a clearer picture will emerge anytime soon. Even after an indictment, his suspected transgressions won’t necessarily be made public, and Ghosn is likely to remain in custody as prosecutors continue their probe. Renault has asked Nissan to share its report on Ghosn, and the French company is conducting its own investigation into his pay package.
If convicted, the 64 year-old manager could face as long as 10 years in prison, prosecutors have said. Most of those indicted in Japan are found guilty, according to Nobuo Gohara, a lawyer and former prosecutor who specializes in financial law.
Ghosn’s situation has put France’s government in a bind. French Finance Minister Bruno Le Maire has expressed support for the Renault-Nissan-Mitsubishi alliance and demanded to see proof of Nissan’s allegations against Ghosn. But the jailed CEO is no favorite of Macron, and has repeatedly clashed with the government over pay and other issues. With Paris engulfed in violent “yellow-vest” protests over inequality and corporate greed, there’s even less chance the French president might come to Ghosn’s aid.
Renault risks remaining in stasis for months, a person familiar with the matter has said -- unless Ghosn is found guilty or serious allegations against him are uncovered. The company is aiming to complete the first conclusions of an internal audit on Ghosn’s pay package and that of other top managers next week, people familiar with the matter have said.
The CGT union has also questioned whether Ghosn committed fraud and misappropriation of corporate assets in France. Gentil and a representative for the union didn’t return requests for comment Friday. A spokeswoman for the agency that handles France’s holdings declined to comment. Ghosn hasn’t spoken publicly about the allegations, though through a lawyer he has denied some of them. He hasn’t been seen in public since he was arrested in Tokyo on Nov. 19.
For now, Renault is run by Thierry Bollore as interim CEO and the duties of chairman are being performed by director Philippe Lagayette. If Ghosn should be formally replaced, the posts of chairman and CEO could be split, one person said. While it’s likely that Bollore would become CEO, it’s unclear who would become chairman, the person said.
Ghosn’s fate is intertwined with that of the alliance he led and of which he was a champion. But in recent years, the Japanese side felt under-represented, even though Nissan brought in more profit and sales. That’s led to speculation whether the partnership can endure without Ghosn as its charismatic cheerleader. Analysts at French brokerage Oddo lowered their price target for Renault stock on Dec. 7, citing the leadership crisis at the alliance. Still, all sides involved have vowed to keep the group going, regardless of Ghosn’s future.
“It seems tricky for Renault to keep Ghosn at the helm, considering that the company is seeking to save the alliance,” said Heiderich, the crisis-management adviser. “And saving the alliance could mean letting Ghosn go.”
--With assistance from Helene Fouquet.
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