The man who could bring down Japan's auto industry

In the space of a few hours on Monday, Carlos Ghosn, who was previously credited with almost single-handedly rescuing one of Japan's flagship car companies and restoring it as a viable global competitor, lost all of his credibility.

Ghosn was arrested Monday on suspicion of falsifying the company's securities reports and allegedly understating his personal remuneration by about 5 billion Japanese yen (€38.94 million) over a period of five years.

His arrest has triggered a corporate crisis across continents. Ghosn is at the center of an alliance between Nissan (NSANY), Renault (RNSDF) and Mitsubishi (MMTOF), which together make one of every nine cars sold around the world.

The Tokyo District Court on Wednesday granted a request from prosecutors to extend 64-year-old Ghosn's detention for an additional 10 days, and there are reports that the violations for which he is being investigated could carry penalties of up to 10 years in prison, a fine of a maximum of 10 million yen or both.

Nissan might also face a financial punishment, possibly as high as 700 million yen.

There has been no official word from Ghosn's representatives, although Japanese media have expressed the belief that he will seek his day in court to refute the allegations against him.

Nissan stocks edged up in Wednesday's trading after tumbling 5.5 percent on Tuesday when news broke of Ghosn's arrest. The company is under fire for what is being described as a lack of corporate governance, a shortage of outside directors with adequate management experience, and for investing so much authority in the hands of one person.

And Nissan's example is likely to be heeded in boardrooms of other Japanese companies in the weeks and months to come.

Read more: Nissan shares tumble after chairman's arrest

Ghosn's rise

Ghosn became president of Nissan Motor Co. in June 2000, at a time when others in the auto industry were balking at the task of rebuilding the company. The heady days of a return to profitability, the creation of the Renault-Nissan-Mitsubishi alliance and a litany of international awards for the Brazil-born businessman's contribution to global business — including France's Chevalier of the Legion of Honor — must seem a long time ago as he now sits in a prison cell in Japan.

Japan's media has, inevitably, descended upon Nissan's global headquarters in Yokohama, southwest of Tokyo, and there has been a steady flow of allegations in the media that Ghosn used Nissan money for personal expenses and demanded the company buy him a number of houses around the world.

Some local reporters have fanned the sense of indignation among ordinary Japanese by pointing out that Ghosn had an annual wage of 5 billion yen without the additional alleged payments.

'Difficult to believe'

People who worked closely with Ghosn said the allegations are hard to believe and — given his personality — they anticipate that he will fight his corner in the court hearings that are to come.

"He is the most disciplined person I have ever met," John Harris, who served as Ghosn's speechwriter at Nissan between 2005 and 2008, told DW. "He would come into a meeting, sit down, always say one word — 'bon' — in French, and then get right to the heart of the matter.

"He was always ready to talk about whatever the issue was and he had an incredible memory and an eye for detail," he said.

He also had the Midas touch when it came to resurrecting a company that had fallen on hard times.

"Before he arrived, the company was a sprawling, disconnected bureaucracy without any direction; he realized that the most important thing was to get the entire organization to focus on priorities and to develop internal human resources, which was a mess when he arrived," Harris said, adding that Ghosn essentially got rid of the seniority-based promotion system by adapting it so that capable young employees with energy and vision could come to the fore.

Harris says he cannot fathom why Ghosn may suddenly have decided to help himself to more money from the company, particularly given that he led a famously quiet life in Tokyo when Harris worked for him. For Ghosn, a night out was usually playing bridge with his neighbors in Tokyo.

Another industry insider, pointed out, however, that Ghosn appears to have changed in 2010 around the time of his divorce, and his bridge evenings are in stark contrast to his second wedding in 2016, when he rented the Palace of Versailles for the reception.

His first wife, Rita, has been quoted in the Japanese media in recent days as describing her former husband as a "narcissist" and a "hypocrite."

Read more: South Korean officials raid Samsung, national pension fund offices

'Textbook case of success'

"Ghosn is almost a textbook case of a successful business leader and he earned enormous respect in Japan for his leadership," said Mieko Nakabayashi, a social science professor at Tokyo's Waseda University.

"It is too soon to know, but it is possible that he thought his salary at Nissan was not in line with executives at international companies — and it is true that Japanese CEOs do not earn as much as business leaders elsewhere. This is a cultural difference — but this seems a very sad end to his time at Nissan," Mieko told DW.

"Right now, there are still a lot of unanswered questions, so the court case will be very closely watched — although Nissan must surely be concerned that the investigation might reveal other problems, and that could have a serious impact on the company," added Mieko.