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Renault Spy Scandal Fallout: Why Ghosn Can't Run Two Automakers

What started out as an industrial espionage case has morphed into a story of corporate fraud and c-suite blood-letting. Back in January, Renault canned three executives after accusations that they had divulged the company's top-secret electric-car business plans. CEO Carlos Ghosn himself led the firing squad. But it now looks as if Renault was completely wrong about the allegations.
Ghosn isn't out of a job, but his number two, Patrick Pélata, has resigned (after initially having his offer turned down). Ghosn can't really depart over something like this -- his role right now is to ensure that Renault's alliance with Japanese carmaker Nissan survives the tragic earthquake, tsunami, and nuclear crisis. However, it's definitely time to ask whether Ghosn can effectively manage two auto companies.

Focus on Nissan or Renault?
Here's the Wall Street Journal's take on the state of the marriage between Nissan and Renault:

When the alliance started, in 1999, Renault was Nissan's savior, as the Japanese company was plunging into crisis amid high costs and management inertia. Renault ended up with a 44% stake in Nissan, while the Japanese company took 15% of Renault.

After a decade, the fortunes of the two partners have changed.

Nissan has been thriving through its activities in China and the U.S. but Renault is present in neither of these markets.

End result? Nissan is now worth twice as much as Renault.

But Nissan is now suffering along with its Japanese automotive brethren. Ghosn has no choice but to concentrate on this side of the business, even as it emerges that the spying case was probably a scam engineered by another Renault employee who was basically just stealing money (BNET's Jim Motavalli runs down the sordid details here). Perhaps this individual knew that Ghosn would rise to the bait if the CEO's commitment to Renault-Nissan's electric vehicles leadership were imperiled. That strategy worked -- until it didn't.

A management shakeup at Renault
The French government owns 15 percent of Renault and is leading the investigation into what went down. This kind of national pressure, however, is going to be tricky for Ghosn to deal with. On the one hand, he needs to get Nissan back on track as quickly as possible. But he also needs to reassert himself at Renault, most likely by instituting a thorough management review, with the government looking over his shoulder.

Is this more than one man can reasonably accomplish? Yes. And it's going to affect Ghosn's glowingly positive PR. Losing Pélata is problematic -- a fall guy was necessary, but now Ghosn will have to elevate a new right-hand man to oversee Renault day-to-day while the CEO straps on his Geiger counter and heads to northern Japan to supervise the restart of damaged operations.

No calls for Ghosn's resignation
In some respects, this is a positive for Ghosn. It gives him an excuse to spend most of his time on Nissan while he waits for L'affaire Renault to blow over. One wonders, however, whether it will become semi-permanent. The Japanese car business needs a hero right now, and Ghosn has volunteered for that duty in the past. And the better he does in the Land of the Rising Sun, the less vulnerable he'll be back in France.


Photo: Nissan Media
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