Markets in Asia have had a rough ride in recent months, thanks to escalating trade tensions and economic slowdown in China. Japan’s domestic stock market just took a significant hit as Nissan stock plummeted following the news that top executive Carlos Ghosn was arrested on fraud charges.
The World’s Hardest Working CEO Falls from Grace
In 2006, Forbes Magazine called Carlos Ghosn the “hardest-working man in the brutally competitive global car business.” As the Chairman and CEO of both Renault and the Renault-Nissan-Mitsubishi Alliance, as well as Chairman of Nissan Motors and Mitsubishi Motors, Ghosn commanded respect in the auto industry.
Ghosn was known for radical restructures and cost cutting programs. He returned Renault to profitability, before bringing it back from the edge of bankruptcy in the 2000s. He received offers to run both Ford and General Motors in the United States, but ultimately declined.
His record of success, while undoubtable, will now become secondary to the news that he was arrested yesterday in Tokyo for fraud.
He is being questioned over false accounting and other irregularities discovered by Nissan in an internal investigation. Chief Executive Hiroto Saikawa said in a press conference that Ghosn was being dismissed and all executive rights would be removed. Ghosn is also likely to lose his position at the top of the Renault-Nissan-Mitsubishi Alliance.
Nissan alleges that Ghosn and his senior director Greg Kelly under-reported their compensation and used company assets inappropriately. There are also other items of misconduct that have not been made public. The Japanese media has reported that Ghosn and Kelly used company money to fund venture capitalism interests and international property purchases. Penalties could include prison time of up to ten years.
What it Means for Nissan Stock and International Markets
Nissan Motor Co. stock dropped by -5.45% at the close of the market on Tuesday in Japan. Stock in the company is now down -15.38% YTD. In addition to this emerging scandal, it has suffered from trade uncertainties, with President Trump threatening this year to apply a 25% auto tariff on all foreign car imports.
Nissan is one of the most prominent Japanese car manufacturers in the U.S., along with Toyota and Honda.
Asian stocks dipped on Tuesday trading. In addition to Nissan’s price slide, stocks were trending down on the back of poor tech sector performance in the United States.
International investors should await further guidance from the company before making new investment decisions. Stock has the potential to recover, with most Japanese investors likely to view the removal of Ghosn as a positive step in the long term.
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