Carlos Ghosn coup theory grows: Did Nissan set him up for a fall?

The surprise arrest of Nissan's former chairman on charges of falsifying financial reports is providing a window into possible corporate intrigue at the Japanese automaker.

Japanese media and some analysts have raised the possibility that the charges against Carlos Ghosn were engineered to sideline him and give Nissan an excuse to end a lopsided alliance with French automaker Renault SA.

"What is fascinating about this story is the politics of it," said Egor Matveyev, an assistant professor of finance at the MIT Sloan School of Management. "It certainly appears that [Nissan] wants more power and control within the alliance. This whole situation may give Nissan the opportunity to reset, and to put all the blame on Renault and Ghosn."

Ghosn's absence while he is held for questioning gives Nissan's side time to maneuver for more power, he said.

Renault dispatched Ghosn to Nissan in 1999 to lead a spectacular turnaround, and the French automaker owns 43 percent of Nissan Motor Co., while Nissan owns 15 percent of Renault with no voting rights. Now, Nissan is more profitable than Renault. Talk of a merger between the two companies was raising resistance in Japan, where sentiments seem to be running in exactly the other direction.

Nissan already feels it's more than paid back what it "once owed" Renault, while Renault doesn't want to lose "the golden egg" that is Nissan, said Etsuo Abe, a business management expert at Tokyo's Meiji University.

"But when things get this messy, the only way out is divorce," he said.

Long simmering dissent within Nissan's Japanese ranks is the backdrop to the Nov. 19 arrest of Ghosn and an American executive, Greg Kelly, on suspicion of falsifying financial reports.

"Ghosn shock" and "Just like a coup," shouted headlines in both mainstream media and tabloids.

As chairman at Nissan and chief executive of Renault as well as the alliance, Ghosn answered to a board headed by himself, holding key roles in determining pay packages and other decisions. Nissan Chief Executive Hiroto Saikawa, who became co-CEO with Ghosn in 2016 and then sole chief last year, says the problems stemmed from his boss having too much power.

In response to a reporter's question he denied the shake-up was a coup, but called Ghosn and Kelly the "masterminds."

It's unclear if Saikawa will be tapped to replace Ghosn as chairman following his dismissal last month. Whether an executive from Renault or Nissan gets the job may signal where the Yokohama-based maker of the Leaf electric car and Infiniti luxury models is headed in the short run.

A source close to Ghosn and his family told The Associated Press Ghosn was stunned and has been asserting his innocence.

She said the allegations were unfounded, since the suspected unreported pay was deferred income he had not yet received.

After Ghosn's arrest, Saikawa said Ghosn had misused company funds and assets. Japanese media pointed to spending on several luxury homes as evidence of such misconduct. The source, who spoke on condition of anonymity because Ghosn's legal team has not released any statements, said the homes in Brazil, Lebanon and other cities were needed for security reasons.

Nissan as a legal entity was charged Monday, along with Ghosn and Greg Kelly, another board member, with violating financial laws in underreporting Ghosn's income by millions of dollars over several years.

But Nissan has not been put under any kind of supervision, and so far only Ghosn and Kelly have been named in the charges. They are being held at a Tokyo detention center at least until Dec. 20.

Whatever the motivations for their arrests, Ghosn has been effectively sidelined indefinitely: Under Japan's legal system, long criticized as "hostage justice," a suspect can remain in custody for months. Trials often take years.

The latest scandal followed other setbacks for the Renault-Nissan-Mitsubishi alliance, despite it having led the industry with sales of 10.6 million vehicles in 2017.

Under Saikawa, Nissan's sales and profits have faltered, especially in the key North American market. The company also has acknowledged a slew of violations of inspection rules for emissions and mileage tests and faulty checks of its finished vehicles at plants in Japan.

Some fear Nissan's relationship with Renault may have been damaged beyond repair: Renault has demanded more information from Nissan, and held off on replacing Ghosn as chief executive, while naming Deputy CEO Thierry Bollore as acting chief.

A breakup with Renault would be painful. The alliance's shared components, technology, production plants and personnel have helped drive its success. Losing that synergy and scale could put the companies at a disadvantage with rivals like Volkswagen AG and Toyota Motor Corp.

At a time when the industry is undergoing a shift to electrification, net connectivity and artificial intelligence, the advantage of scale is likely to accelerate in coming years.

So far, the alliance has stayed intact, at least in public. Both French President Emanuel Macron — France has a 15 percent stake in Renault — and Japanese Prime Minister Shinzo Abe are voicing their support.

To gain more balance in alliance stake-holdings, Nissan could issue new shares. It also could raise its stake in Renault, though that process could get complicated and involve legal battles.

Some analysts say Ghosn's ouster also reflects nationalism at Nissan.

"There is a strong sense among Nissan employees that Nissan must be Japanese," said Tetsuya Watanabe, a critic on economic issues, describing the handling of Ghosn's case as "kamikaze."

Takaki Nakanishi, auto analyst and chief executive at Nakanishi Research Institute Co. in Tokyo, said the "traditional people at Nissan" were unhappy that foreign interests had more say in management than they did.

"They were also afraid Nissan will be unfairly used for French stakeholders or the ambitions of Carlos Ghosn," he said. "Inside Nissan, I felt, there was a lot of confusion, complaining, fear."