At this point I feel like a rising stock price after a crisis should be a major red flag for long term corporate survival.
Carlos Ghosn was able to "turn Nissan around", but it was at the expense of future product capabilities (in my opinion) [Disclosure I work for GM, this is solely my own opinion]
Also, I must say that it is not clear to me that anyone could know what a long term winning play looked like 10-15 years ago when the damage was done (in my opinion). It takes a lot of effort and money to make a mediocre automobile, it takes a lot more to make a high quality automobile.
This seems to be the classic way in which management types destroy technical companies. Same thing happened a decade back in electronics companies in Japan (Sony comes to mind).
Technical competence is generally very hard to judge and often even harder replace. It's not surprising that the same management types are salivating at the thought of replacing people with AI.
Ghosn was trained as an engineer at École des Mines de Paris after a humble background in the 3rd world including continual sickness from unsanitary waterwater. He worked from the bottom up in R&D at Michelin and did the impossible turning it around during hyperinflation period in Brazil.
By all estimations he's a genius with as good of chops as anyone could ask for his responsibilities, with a unique set of citizenship, connections, and multilingualism to go with it. Even his escape from Japan was just stunningly executed and the perfect selection of professionals with technical competence to pull it off.
A genius at some things certainly. I don't know enough to judge his early successes but his more recent ones seem to have a theme of constant consolidation and mergers with clear short term benefits but medium and long term shaky outcomes. Then again that's the trend of all markets the last few decades.
Oh and financial fraud appears to be one of the things he was good at based on the allegations from Nissan and Renault among others.
MotorTrend's "The InEVitable" podcast has an episode with the WSJ guy that is a lot longer and while less information-dense, it is more colorful and still gets the story across pretty comprehensively.
I don't know, the Renault Logan (and the B platform in general) was extremely good from the engineering standpoint. Cheap, reliable, easy to maintain, easy to fix. The technical competence in building gasoline cars was definitely there.
They missed the electric wave sure, but as with any innovations the more competent you are in the previous wave of technology the harder it is to switch to the new one. But it's a different kind of problem.
The Leaf 2 was and is a very good EV for its price point.
Its weird how Toyota had the first mass-market PHEV with the Prius but got hyperfixated on hydrogen cars, and Nissan had one of the most successful BEVs (Leaf 2, maybe even Leaf 1) and just sort-of gave up. I vaguely remember Honda having a decent EV.
I wonder what makes EVs so antithetical to Japanese car companies..
At the time hydrogen was not nonsense. Good lithium batteries happened.
Hydrogen is very impractical. Leaks easely and the pressure involved is scary. It is no surprise that good alternatives more or less scrapped the whole thing.
There's an alternative future where some genius figured out a technical innovation for hydrogen and batteries struggle to scale. There are definite disadvantages to hydrogen in retrospect, but some of that has to do with the relative success of the engineers.
Hydrogen is also not particularly "green" without further spending for generation capacity.
Currently, most hydrogen is produced from fossil fuels, specifically natural gas. Electricity—from the grid or from renewable sources such as wind, solar, geothermal, or biomass—is also currently used to produce hydrogen. In the longer term, solar energy and biomass can be used more directly to generate hydrogen.
Going directly to batteries is far more efficent. Going from power to hydrogen is incredibly inefficent. So at least not as much energy needs to be produced.
> The technical competence in building gasoline cars was definitely there
I'm not sure about your statement here after the wet timing belt inside engine debacle for many European cars engines including Renault that's still existed until today. It's a total disregards of the laws on material physics and chemistry [1], [2].
[1] Wet Belt in Oil Engines: Who Approved This and Why Is It Still Being Made [video]:
While all true people also do not service their cars and these must be serviced on a regular interval with non standard components. Still a stupid design though which should never have been out into production. Glad my car has a chain, even had one in the past with a wonky guide which made lots of noise but worked until the end without issues (write-off was not engine related but purely economical, expensive tires brakes etc).
>They missed the electric wave sure, but as with any innovations the more competent you are in the previous wave of technology the harder it is to switch to the new one. But it's a different kind of problem.
I disagree with this statement.
The greatest engineer, scientist and inventor of all time, Stanford Ovshinsky, absolutely had no problem excelling in any field he put his mind to.
It's incontrovertibly true at the organizational level, not necessarily the personal. Individuals can be polymaths, and I would posit that success in one ___domain can actually predict success in others.
Organizations OTOH typically develop inertia when it comes to their goals and purpose. Any change takes time to communicate through the organization for one thing. People are conditioned to push the Pavlovian success buttons of the past, for another. Managing budgets, stakeholder expectations, and the disconnect between leadership and the ground level are a whole other class of issues.
Possibly there was a smarter mechanical engineer than Mr. Ovshinsky, it would be hard for anyone to argue he wasn’t in the top 0.1% in his field(s).
Why a top engineer in the field of making petrol powered cars shouldn’t be able to quickly learn a “new field”, using quotation marks here because electric cars have been around for >100 years, is beyond my understanding.
I don't mean to claim that Renault is technically incompetent (obv. that's false).
I find that these companies have something very unique about themselves in terms of culture. And you lose a lot when you try to change it.
For eg. a lot of expats in Tokyo have this attitude that Japanese companies are dim-wits and that they have "westernize" and become English-speaking techbros (Rakuten calls this English-nization).
There might be some things that can be emulated better, but the solution always tends to be a bit too... christian, or rather monotheistic (ie . wipe out everything before and mass replace).
> Technical competence is generally very hard to judge
At an end-user level it always was easy to judge that Honda was at the top for technical competence. The same it true for judging the bottom rung. You can judge by favoring high quality products, or by disfavoring businesses that try to sell you on sizzle and "fun". It's all the same.
Could you expend on the parrallel you see with Sony ?
I was under the impression it mostly failed because of how bad it was at software, and the strategy tax hitting them heavily as their ecosystem was penalized by that weakness, so I'd be glad to hear a different take.
That seems like the current model in tech, to the point that companies are eventually renamed for their only product (RIM -> BlackBerry, Sun -> JAVA, dotCloud -> Docker), but there are also a few Asian megacorps that have their fingers in seemingly everything, think of Yamaha and Mitsubishi.
to my knowledge, Sun never actually made money off of Java, their main source of revenue was always selling hardware (indeed, one of the reasons Oracle bought them out was because Oracle was one of the biggest consumers of Sun's hardware).
> At this point I feel like a rising stock price after a crisis should be a major red flag for long term corporate survival.
It depends. If you see a lot of insider buying after a bottom it can be a good sign that there's strong internal faith in the companies future. I've used it as a buy signal myself before when a market cap is high enough. It has paid off.
> it is not clear to me that anyone could know what a long term winning play looked like 10-15 years ago
Well it probably _wasn't_ partnering with a Chinese state company to try to expand the brand there. That was a poison pill.
Under Goshn and his close early advisors, Renault-Nissan started working on EVs, launching the Leaf and Zoé. Early, he also managed to streamline production of the two companies, and started to implement management changes that let some workers have more autonomy.
The issue is that power got to his head and truly believe he was the second coming of Jesus or something, and stopped improving his companies to rub shoulders with the Nepo CEO/aristocrat crowd. Had he continued the push toward affordable EV, Nissan could have been BYD, but R&D stopped, for no visible reason.
My personal theory is that the fallout from his divorce estranged him from his early friends and his closest advisor (his wife) and idiotic sycophants made him believe he was above the law and deserved even more. I've heard a lot of good things about pre-2008 Goshn, from people who aren't usually glazing billionaires, so maybe I'm biased.
He's definitely narcissistic. But that doesn't make him wrong. It suited the Japanese board very well to paint him as corrupt and get rid of him. Nissan's performance after that took a decidedly downward trajectory. Which is why the merger with Honda became a kind of hail-Mary strategy recently.
There was an interesting interview with him where he commented on the, then, still active negotiations about a possible merge of Nissan and Honda.
Very interesting to listen to. He identified that there was essentially no synergy between the two and that a merger doesn't really make sense for either company. They don't really complement each other. After the merger, you'd merely have two of each in a gigantic company that isn't performing great. Similar cars, going after similar buyer segments, competing EV strategies and related investments, etc. Except Honda is a bit better than Nissan. So, they'd be ending up inheriting a lot of problems whereas Nissan wouldn't really gain anything they don't already have.
The core issue is that Nissan in particular needs to adjust course and is not willing to do that. That's also the reason this deal is collapsing: Honda doesn't want to make Nissan their problem and Nissan is rejecting the notion that they need to change.
> He's definitely narcissistic. But that doesn't make him wrong.
If you’re right about narcissism, one of the issues there is an inability to realize that he can be wrong. “Maybe I’m wrong about this” literally cannot occur to the narcissist, their entire worldview is built around their being right and anyone who disagrees with them is wrong (and therefore an enemy).
BYD is unique because it can leverage the Chinese government's push into EVs along with the lax environmental regulation giving cheap batteries & other components. I dont think anyone can compete with Chinese car makers.
I believe that this thesis supported by many Americans, that the Chinese companies are too strong competitors for the US companies only due to governmental subsidies and lax environmental regulation is an extremely dangerous illusion.
Until maybe 10 years ago, I would have agreed that all or at least most of the Chinese products were no better than copies of Western products.
However during recent years, at least during the last 5 or 6 years, both among commercial products and among the published research papers, I have seen far more innovation from China than from USA.
Such underestimation of the capabilities of a competitor, like the assumption that without subsidies or lax regulations they would not still be better, can only doom USA.
While these claims about subsidies and lax regulations are ubiquitous in USA for justifying failures, I have yet to see any proof or any accurate numeric data supporting them.
I doubt that China really has laxer environmental regulations than USA. What is likely to happen is that in China it must be much easier to avoid the enforcing of the regulations, by bribing the authorities.
Perhaps there are governmental subsidies in China, but in USA I never see the start of any significant private investment without great subsidies, at least from the local government, in the form of various kinds of tax breaks.
This kind of governmental subsidies that are very common in USA are only seldom permitted in other countries, e.g. in Europe.
> this thesis supported by many Americans, that the Chinese companies are too strong competitors for the US companies only due to governmental subsidies and lax environmental regulation is an extremely dangerous illusion.
[...] I have seen far more innovation from China than from USA.
I full agree on this.
But what people also often miss is that wage levels are not even close to comparable. Chinese manufacturing pays an average of <$25k (purchasing parity adjusted, ~15k otherwise!!) for a 49h week.
It is absolutely expected that the US is not competitive in labor intensive industries, simply because Americans are rich. Trying to "fix" this with tariffs and relaxed regulations (to lure heavy industry/manufacturing back) is an expensive experiment doomed to fail, and taxpayers and consumers are gonna pay the price.
If you campaign with "we're gonna bring back tons of jobs that pay $5/hour, but don't worry, taxpayers/consumers are gonna pick up the difference", suddenly the whole thing does not sound that good any more.
And subsidies don't only affect the final price of a good: they also provide a company more funding for R&D. To say nothing of forced technology transfers via joint ventures.
The EU also still subsidizes a ton of industries, e.g. agriculture at €40.95 billion https://agriculture.ec.europa.eu/common-agricultural-policy/... (I'd agree that subsidies are needed to support a key sector like agriculture today, but they're still subsidies)
EU car manufacturers are also heavily subsidized. Subsidies are really hard do compare because you can structure them very differently and still achieve similar results (think direct loans or land leases, lower taxes, state sponsored infrastructure like rail, electricity, water, large state-sponsored orders, research grants, workforce education, consumer grants for EV vehicles, lower taxes for EV vehicles etc.).
Hyundai and Kia still manage to make fairly competitive EVs. Having an established dealer, customer and maintenance networks can mitigate those BYD advantages.
Also if Japan had a serious contender fr the EV space, a good CEO should be able to persuade their government subsidies are deserved. With a trifecta of corporate, union and environmentalist lobbying.
His pay sounds small in retrospect and hardly compares to what Elon extracts from Tesla, but still deemed high by Japan's standards where employee's jobs are considered sacrosanct in a more just system. Ultimately that was why he was hired in the first place, and Nissan needed such a outsider at a critical moment to reform themselves but didn't learn from it unfortunately.
There was a famous Dutch philosopher who managed to piss of the government and escaped from a castle that way (minus the private jet) in the 17th century. His wife was allowed to bring him books and he used the box to escape. He went to Paris and never got extradited either.
His prosecution was blatantly motivated (the CEO who replaced him has far bigger embezzleme^H^Hfinancial irregularities that no-one cares to charge him for). I doubt people would have been so eager to help him escape if he had actually broken the law rather than being charged for running a big company while foreign.
He had enriched himself to the tune of tens of millions of company dollars completely undisclosed to the firm.. he had multiple mansions, yachts, and “CEO Reserve” bank accounts that the BoD wasn’t aware of. The men who were “so eager” to help him escape were paid upwards of $1M to do so… man I’m getting tired of people justifying ludicrous amounts of graft and theft.
If other people embezzle as well, send them to prison, but there’s no universe in which Ghosn is clean. And there are plenty of big companies ran by people who aren’t so morally bankrupt.
> If other people embezzle as well, send them to prison, but there’s no universe in which Ghosn is clean.
Well, selective justice is a form of injustice. I only have superficial knowledge of the Ghosn saga, but if what the GP alleges is true, then it's not fair to Ghosn that he's prosecuted for something that others get a pass. Of course, I take your point that it's entirely possible to be a bigcorp CEO without fraud and self-dealing.
To scale it down, lots of people drive over the speed limit, which is against the law; but only some people get pulled over and ticketed for it. Many people also observe the speed limit. In the Ghosn analogy, suppose that Japanese drivers got a pass, but foreigners didn't.
Should everyone get pulled over the instant they exceed the speed limit? Do we want to live in such a world? Is it just a matter of scale, the difference between driving a car too fast vs. stealing millions of dollars from your employer?
There are plenty of criciticisms about the means by which he was prosecuted but "others get a pass but he doesn't" is not a great way of thinking about this.
If the government decides to get more serious about this stuff, there will be firsts! There will be people who "got away with it"! It's never applied perfectly evenly. You gotta start somewhere.
Of course the way he was thrown around, when they could have impounded a bunch of his assets and just restricted his movements... the police have their ways of doing things and restriction of speech in particular to avoid coverups is probably a huge chunk of their motivations.
Ghosn isn't the first executive in Japan to ever be arrested. But maybe the police felt the stakes were too high. During the Livedoor scandal, Horie had to post a 300 million yen bond for his temporary freedom, and that was for an "internet company". How much would Ghosn's bond need to be in comparison? Not saying that this is the right way to go about things, but it feels at least consistent.
> If the government decides to get more serious about this stuff, there will be firsts! There will be people who "got away with it"! It's never applied perfectly evenly. You gotta start somewhere.
Sure. But if that "somewhere" just happens to be the literal 1 foreigner among literally hundreds of CEOs doing the same thing, there will naturally be raised eyebrows.
> Should everyone get pulled over the instant they exceed the speed limit?
In places with speed cameras, that is exactly what happens. There’s no better way to find an unjust law than to enforce it evenly.
And scale is very important! In your analogy, many CEOs are speeding, some driving 5mph over, some 10mph, but Carlos was tripling the speed limit and then sawed through the bars of the courthouse before he saw trial. It’s insane to me that people are defending it. If you don’t want to be selectively prosecuted for massively embezzling company funds - don’t embezzle company funds..
He had secretly bought himself a 140ft yacht with stolen company funds!
Protip - you should care if he raped 12 nuns! Japan's justice system, while certainly has issues is universally considered to be one of the worlds' fairest. Their high conviction rate is solely due to taking so few cases to judgement as most plead out.
Not so - Japan's [criminal] justice system is absolutely not "universally considered to be one of the worlds' fairest". Cite any authoritative source for claiming that. Most sources I found cite the Nordic countries or other W European countries.
(A high conviction rate at trial in Japan is merely due to not having a right-to-silence, imprisonment till trial, prosecutors discretionarily dropping some cases.)
Most of the stereotypes of the Japanese justice system are outdated, and it's pretty funny to hear one of the wealthiest people in the world claim he wouldn't get a fair trial there while he was walking free with unrestricted access to his lawyers after numerous arrests for serious financial crimes.
"universally considered to be one of the worlds' fairest" is not accurate, and "good by Asian standards, but not as good as the North European average" is more like it.
It is not stereotype but simple fact to state that Ghosn was held for questioning for a ridiculously long time by Western standards: 129 days over two periods in the Tokyo Detention House, of which 53 before indictment. Eight hours a day questioning, with no defense lawyer allowed to be present. You might somehow incriminate yourself if that was done to you too.
Ghosn was absolutely a special case: it was extremely plausible that he wouldn't get a fair trial there, as he was the highest-profile (non-Asian) foreigner in Japanese industry, with saturation international media coverage, and moreover there was major protectionism within the two car companies against operationally merging with Renault and actually having plant closings and major layoffs in one of Japan's most sacred industries, which also reportedly incurred high-level opposition from government. (This is not commenting on the specifics of Ghosn's financial case.)
And again, the fact that few high-profile white-collar cases go to trial but end in a plea (which you say is a virtue of the Japanese system) makes it hard to predict what might have happened, both evidence admissibility, verdict and sentence. Certainly unlikely he would have gotten a suspended sentence, if convicted.
UPDATE: Japan’s prosecutor reportedly repeatedly broke the law by leaking details of the case against Ghosn. Which pretty much corroborates both "wouldn't have gotten a fair trial" and "high-level political opposition".
UPDATE 2: RP was one of a handful of Nissan insiders who knew about the planned arrests beforehand: "I was called into Hari Nada's office…and told there was going to be a dramatic arrest. Arranged for maximum publicity... When you lie to someone, to get them back into a particular jurisdiction, so that you can have them arrested in a very public manner, that says a lot about what's going on." [0]
> He had enriched himself to the tune of tens of millions of company dollars completely undisclosed to the firm.. he had multiple mansions, yachts, and “CEO Reserve” bank accounts that the BoD wasn’t aware of.
Really? Why did none of that come through in the court case then? I don't like the norm of giving CEOs valuable benefits instead of cash, but it's undeniably an accepted norm, especially in Japan.
He was convicted for the deferred pension compensation that he had not yet actually received, and for one year, despite the fact pattern being the same every year. The court blatantly made the minimum possible conviction because they knew none of the charges had merit but couldn't possibly acquit him.
The BVI found that tens of millions of dollars stored there and the luxury yacht bought with Nissan’s funds and registered to a Shell company owned by Ghosn’s son, actually did belong to Nissan.. and on and on.
Why does anyone give that absolute creep the benefit of the doubt? It didn't come out in the court case because he fled the country before he was tried!
That looks to be one side's claims, and even this one-sided telling acknowledges that he never received any of that money, and that the CFO and finance department signed off on what happened.
> It didn't come out in the court case because he fled the country before he was tried!
He fled the country after being detained and isolated (especially from his wife) for literally years without actually being charged or getting to trial. They were blatantly trying to break him without having to go to the trouble of actually proving a case. And the trial I'm talking about, that convicted him on exactly one count, was held in his absence after he escaped and had no reason to not throw everything at him.
If and when he's convicted in a fair trial under international norms where he gets a fair chance to defend himself, I'll condemn him for that. But until then I'm not going to take the allegations of the people who wanted him gone at face value.
> Even this one-sided telling acknowledges that he never received any of that money, and that the CFO and finance department signed off on what happened.
It absolutely doesn't say that.. and it's not a credit to Carlos that many of his schemes to steal tens of millions of dollars in the future were discovered before he could do so.
> In addition to the more than $90 million in undisclosed and unpaid compensation, Ghosn and his subordinates knowingly or recklessly made, or caused to be made, false and misleading statements regarding more than $50 million of additional pension benefits for Ghosn. These included misleading Nissan’s CFO and other Nissan executives regarding the accounting for the additional pension amounts, and creating a false disclosure to support how Nissan accounted for them
[..]
> On or around February 23, 2015, at Ghosn’s direction, Nissan Employee 1 submitted an “Application for Budget Usage” signed by Ghosn, Nissan Employee 1, and Nissan’s CFO, to approve the use of the CEO reserve to book the LTIP awards. Nissan’s CFO was falsely told that the LTIP awards were a broad-based grant to numerous Nissan participants rather than that the vast majority was for Ghosn and included exchange rate protection on the inflated retirement allowance. Relying on this false information, Nissan’s CFO approved and signed off on the LTIP expense request, and the amounts were recorded over three fiscal years. Nissan’s CFO would not have approved booking the LTIP expense without additional disclosure if he had known the truth about its actual intended use.
The board approved Ghosn to create a subsidary to invest in new technologies and instead he spent over $20M on houses for himself in Rio and Beirut...
I literally can't believe people defend this level of corruption. He didn't spend "years" in jail awaiting trial, it was 3 months after the first arrest, another month after the second and then he fled the country within a year of his first arrest [the Japanese kept him in jail for those first 3 months because for some reason they thought he was a flight risk!)
> it's not a credit to Carlos that many of his schemes to steal tens of millions of dollars in the future were discovered before he could do so.
It's weird and misleading to describe money he never received and will never receive as "undisclosed compensation".
> Nissan’s CFO was falsely told that the LTIP awards were a broad-based grant to numerous Nissan participants rather than that the vast majority was for Ghosn and included exchange rate protection on the inflated retirement allowance. Relying on this false information, Nissan’s CFO approved and signed off on the LTIP expense request, and the amounts were recorded over three fiscal years. Nissan’s CFO would not have approved booking the LTIP expense without additional disclosure if he had known the truth about its actual intended use.
Right, that's the same part I was reading. The CFO is evidently claiming now that he was deceived back then, let's see what the evidence for that looks like.
From the fact that we have all these detailed figures and calculations, it looks to me very much like the CFO, board and finance department were in on the whole thing. This isn't him secretly taking money out of the vault, it's the company doing accounting tricks to pay him in a way that's more tax-efficient and then flipping it into saying he was stealing from them when they decide to get rid of him.
> It's weird and misleading to describe money he never received and will never receive as "undisclosed compensation".
That's literally just basic accounting. If you are required to report all compensation someone earns and they get $100k salary, $100k bonus, and you put $800k into a retirement account with their name on it - you can't say they only made $200k last year. They only reason he will never receive this undisclosed compensation is because the plot and the blatant illegality was discovered.
And lol, of course his is using the pilfered funds to setup his son in Silicon Valley where he worked for Joe Lonsdale.
> If you are required to report all compensation someone earns and they get $100k salary, $100k bonus, and you put $800k into a retirement account with their name on it - you can't say they only made $200k last year.
And yet the vast majority of large Japanese corporations do exactly that, and the Japanese court acquitted him on that exact fact pattern for all but one of the years they examined.
You keep referring to a court case but I think you’re talking about Kelly’s? Ghosn has never had a trial in Japan, so he hasn’t been acquitted (or convicted) of anything. Even if the pension deceit was somehow above board, there’s still the inconvenient 140ft yacht unknowingly paid for with Nissan funds and registered to Ghosn’s son’s shell company parked in a bay near Beirut that multiple different courts have found was illegally obtained..
Carlos Ghosn was able to "turn Nissan around", but it was at the expense of future product capabilities (in my opinion) [Disclosure I work for GM, this is solely my own opinion]
Also, I must say that it is not clear to me that anyone could know what a long term winning play looked like 10-15 years ago when the damage was done (in my opinion). It takes a lot of effort and money to make a mediocre automobile, it takes a lot more to make a high quality automobile.