A lavish party at the Palace of Versailles for the benefit of the boss and his family. Costumes in the style of Marie Antoinette. And the venue paid for by the company.

Revelations of this type would be embarrassing for any business. But the news that Renault is investigating what it calls “a personal benefit” worth €50,000 in 2016 at the former French royal seat for its then chairman Carlos Ghosn goes to the heart of the crisis facing both the carmaker and the French government.

The arrest last November of Mr Ghosn in Tokyo on charges of financial misconduct at Nissan, Renault’s Japanese partner, has reignited a simmering rivalry between the French and Japanese nationalists in each camp of the international car alliance. 

For many on the French side, the sudden detention of Mr Ghosn and the refusal to release him on bail coincided with a plan to topple him and rebalance the Renault-dominated alliance in Nissan’s favour. That theory is shared by Mr Ghosn and his allies, who say he planned to unite Nissan and Renault in a holding company that would probably have meant executive job losses in Japan.

All of this has left Paris in a bind: scrambling to preserve an alliance that became a byword for successful industrial co-operation but also shocked at the way Mr Ghosn has been treated. 

French President Emmanuel Macron (L) listens to Renault CEO Carlos Ghosn during a visit of the Renault factory in Maubeuge northeastern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
French president Emmanuel Macron, left, listens to Carlos Ghosn during a visit to the Renault factory in Maubeuge, northeastern France, last November © AFP

As one Renault adviser says of Nissan’s aggressive tactics: “The attack is massive and the organisation of it spectacular . . . If you respond to the attack with counter-attacks, then you will explode the alliance, so we’ve decided not to get into a discussion about whether there is a plot or not.” 

The Versailles revelations — the first time that Renault has made any public suggestion of possible wrongdoing by Mr Ghosn — add a further complication to the mix. While the Franco-Lebanese-Brazilian tycoon had alienated many on the Japanese side through his large salary and high living, he had also accumulated his share of resentments in France — especially at a time when the government is being assailed by the gilets jaunes protests.

“He wanted to be an American CEO,” says one executive who knows him well. “They had the trappings, the pay and the adulation of being corporate titans. He never got that in France.” 

Mr Ghosn, who remains in a Tokyo jail on financial misconduct charges protesting that he is the innocent victim of “plot and treason”, has said he will repay the €50,000 for the use of Versailles.

While both governments have endorsed the alliance — which, together with the third partner Mitsubishi employs 450,000 people and makes 10m cars a year — the bitterness on each side will make it hard to restore peace and commit themselves to the billions of dollars of joint investments needed to assure the alliance’s future success. 

In an acerbic exchange of lawyers’ letters, Renault has questioned Nissan’s commitment to the alliance, while the Japanese company has accused its French partner of resisting the investigation into its former chief executive.

Regardless of the different views over the merits of the case against Mr Ghosn, Renault’s advisers, French officials and Mr Ghosn’s friends say some Nissan executives were eager to topple him because of his plans for the alliance.

One Renault adviser characterises the stream of leaks from Japanese prosecutors and from Nissan about Mr Ghosn’s alleged crimes as a “blitz” and “shock” tactics in a fight for control of the alliance. Another, speaking figuratively, says: “I think Ghosn had decided to kill [current chief executive Hiroto] Saikawa and Saikawa then decided to kill the king.”

Senior officials in the French government agree that Mr Ghosn was facing fierce opposition from within Nissan — though perhaps not from Mr Saikawa himself — because of his proposed reforms, the details of which he guarded jealously even from some members of the Renault board. Mr Saikawa has denied there was a corporate coup to depose Mr Ghosn.

Employee carry out final inspections on the body shells of freshly painted Nissan Micra, right, and Renault Clio, second left, automobiles inside the Renault SA factory in Flins, France, on Thursday, Feb. 23, 2017. Carlos Ghosn, one of the auto industry's most celebrated turnaround artists, is relinquishing his CEO role at Nissan Motor Co. and turning over day-to-day control to Hiroto Saikawa as he focuses on strengthening the carmaker's alliance with Renault and Mitsubishi Motors Corp. Photographer: Marlene Awaad/Bloomberg
Employees work on Nissan Micras and Renault Clios in Flins, France. The arrest last November of Carlos Ghosn has reignited a rivalry between the French and Japanese nationalists in each camp of the car alliance © Bloomberg

“Saikawa and many in Nissan are attached to the alliance and its international aspect,” says a senior French official. “But some in Japan are very nationalist, and some are opportunistic.”

In the French government and the Renault boardroom, the immediate goal is to ease tensions and stabilise the alliance while the case against Mr Ghosn proceeds. Jean-Dominique Senard, the French chief executive of tyremaker Michelin who was appointed in January to replace the detained Mr Ghosn as Renault chairman and to sit on the board of Nissan, visits Tokyo this week.

“From the beginning, we wanted to make the climate calmer, because we were also stunned by the arrest of Carlos Ghosn and the announcement of the charges against him by Nissan and the prosecutor,” says one Renault board member. “We wanted to draw a line between the situation of Carlos Ghosn and the future of the alliance.”

The last thing that French President Emmanuel Macron needed in November, just as he faced gilets jaunes demonstrations over the economy, was a challenge to a French industrial champion and one of the country’s largest employers. Since the arrest, Mr Macron has twice spoken to Shinzo Abe, Japan’s prime minister, to tell him of the need to preserve the Renault-Nissan alliance.

Mr Ghosn was set to receive more than $80m in deferred compensation after retirement. He is accused in Japan of understating his pay in company documents, abusing his position to transfer personal trading losses to Nissan and receiving €7.8m in improper payments from a Netherlands joint venture with partner Mitsubishi Motors. 

In a short statement in court, Mr Ghosn denied that he ever received any undisclosed compensation from Nissan and said his “draft proposals” for post-retirement pay were reviewed by internal and external lawyers, showing that he had no intent to violate the law.

Before the arrest, neither Nissan nor the Japanese authorities had said a word about the probe to the board of Renault, which owns 43 per cent of Nissan, or to the French state, which owns 15 per cent of Renault and appoints two of the French company’s 20 board members. 

Renault — whose lawyers say they are outraged by the way some Nissan investigators are working in tandem with Japanese prosecutors when Nissan itself has also been indicted — sent an 82-page list of questions to Nissan about the accusations against Mr Ghosn in late December after receiving a summary from Nissan. Renault directors and lawyers say they have yet to receive a reply. 

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French officials, Mr Ghosn’s associates and present and past board members of Renault paint a picture of a hard-charging Mr Ghosn, who rescued Nissan in 1999 and went on to build the three-company alliance but who finally alienated key Nissan executives with the proposal for a new holding company. 

Mr Ghosn, however, was not simply a French appointee sent to do the bidding of Paris in his position as the head of Nissan. He was in fact at least as angry as Nissan’s executives were about the French state’s 2015 decision to temporarily boost its stake in Renault to preserve its double-voting rights as a shareholder. He knew the raid would enrage the Japanese and saw it as a threat to the stability of his international creation.

“Ghosn was really, really pissed off,” says one person who witnessed his reaction. “I’ve never seen him like that.” He had a bitter falling-out with the architect of that French scheme — Mr Macron, who was then economics minister — although officials and Renault executives say their working relationship was subsequently restored after Mr Macron became president and Mr Ghosn accepted a pay cut at Renault. 

At the same time, Mr Ghosn’s imperious ways and tycoon lifestyle had already left him with few friends in either France or Japan, where he had once been feted as Nissan’s saviour. Whereas other French company heads would typically drop everything at a summons from a junior minister, Mr Ghosn twice refused to meet France’s prime minister, citing a busy schedule. 

Nissan Motor Co Ltd Chief Executive Hiroto Saikawa speaks at a news conference in Yokohama, in this photo taken by Kyodo February 12, 2019. Mandatory credit Kyodo/via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT. JAPAN OUT. NO COMMERCIAL OR EDITORIAL SALES IN JAPAN
Carlos Ghosn hinted in an interview from jail that he had been thinking of firing Nissan chief Hiroto Saikawa, above, before his arrest because of the carmaker's poor performance © Reuters

With his appearances at Davos, roster of private jets and obsession with high pay — he asked his public relations team to print charts showing how his remuneration lagged behind that of bosses at General Motors or Fiat Chrysler — he became a liability for French governments, which regularly whipped up opposition to his remuneration at the annual shareholder gatherings. 

In Japan, too, his pay raised eyebrows. In the 2016-17 financial year, for example, Nissan’s investigations show his total compensation including deferred pay was ¥2.88bn, more than seven times the ¥396m of Mr Saikawa.

But Mr Ghosn’s compensation was not the only reason for hostility towards him at Nissan. Executives were concerned about the way Renault (and, by extension, France) dominated the alliance even when Nissan provided the bulk of profits.

More importantly, according to Mr Ghosn and his associates, the Japanese executives were also worried about losing their jobs. Mr Ghosn himself hinted in an interview from jail that he had been thinking of firing Mr Saikawa before his arrest because of Nissan’s poor performance. “When a company’s performance declines, no CEO is immune to being dismissed,” he said. 

Mr Ghosn’s friends and others who know the company in Paris say they think he was targeted by Nissan executives because he planned a further shake-up at the company and envisaged job cuts that would have hit managers as much as factory workers. 

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Jean-Marc Daniel, an economics professor and a college friend of Mr Ghosn who last spoke to him in October, says the businessman had taken note of warnings from industry leaders on the need for restructuring to meet the challenges of the future, including the rise of electric cars and autonomous vehicles.

“This time the lay-offs are not only going to be for the low-skilled but also for the cadres,” Mr Daniel says. “The Japanese thought that the jobs to be lost would be largely in Japan. Their feeling was that there would be a merger and that would mean the disappearance of the Japanese company. The Japanese wanted to retake control.”

He concluded: “Unskilled people act through their trade unions. The higher-ups operate through plotting.” 

Nissan declines to comment on what it calls speculation, but says no specific proposal was made about a potential merger and that it was “unified in its commitment to preserving and strengthening the alliance”.

Among Mr Ghosn’s strengths as head of the alliance were his language skills, his cultural dexterity and his international outlook — he speaks English, French, Arabic, Portuguese and a little Japanese — which allowed him for years to allay the fears of nationalists in both Japan and France. He sought to “denationalise” both Renault and Nissan, changing Nissan’s official language from Japanese to English and overseeing the hiring of senior executives for both groups from third countries such as Britain, Germany and Mexico. 

Carlos Ghosn blames his downfall on a ‘conspiracy’ and a ‘dirty game’ by Nissan executives to bring him down © Reuters

Yet Mr Ghosn’s proposals, including one for the holding company, were already prompting grumbles at Nissan by the time the company’s first investigation into him was launched last year.

“Maybe the idea of the holding company was just the last straw,” says a second Renault board member. “Ghosn kept all of this in his head, he didn’t share with many people . . . I think that over the past few years he wasn’t appreciated at Nissan.” 

Even some on the French side think Mr Ghosn had become a liability by the time he was arrested. “There was a mistake because everyone thought that Carlos Ghosn was a guarantor of the alliance,” says a senior French official. “But his style of management had become a problem.” As one French executive with experience in the motor industry says: “It doesn’t look good in the middle of the gilets jaunes crisis.”

The question now is whether the French and Japanese sides can resolve their differences.

“The automotive business is entering difficult times, at least in the short term,” says one of the Renault directors, pointing to the need to spend billions of dollars on new technology just as major markets in China, the US and Europe were facing headwinds. “The investments are colossal.”

Nissan, although vulnerable because of low profit margins and the indictment in Japan, has not so far ceded to Renault’s wish to have Mr Senard replace Mr Ghosn as Nissan chairman. For its part, the French government insists that Renault will not cut its stake in Nissan nor lose effective control of the Japanese company. 

Mr Macron’s advisers want time for the dust to settle once Mr Senard takes over before any further restructuring. However, that will be harder if Mr Ghosn’s case lasts three or more years — as some in Tokyo expect. “There is,” says a senior government official in Paris with a taste for understatement, “a need to rebuild trust.” 

Additional reporting by Kana Inagaki in Tokyo

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