Nissan Motor Co’s shares dropped in excess of 6 percent on Tuesday as Chairman Carlos Ghosn’s arrest in the previous day gave shockwaves through the business world and threw into uncertainty the future of Japan No.2 automaker and its worldwide coalition.

Nissan said on Monday an inner investigation activated by a tip-off from a whistleblower had revealed that Ghosn was involved in misconduct including personal use of company money and under-reporting for years how much he was earning. He was under arrest and would be terminated from Nissan’s board this week, it said.

Ghosn is also chairman and CEO of Nissan’s French partner, Renault, and chairman of Japan’s Mitsubishi Motor Corp, the third partner in the alliance.

Expelling Ghosn will pose questions about a coalition that he personally formed and had promised to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.

It also brings into center the future of Nissan – the largest partner in the coalition – at once it is seeing falling profits because of weak U.S. sales and is facing heightened rivalry from opponents who are investing deeply in new development parts like internet connected cars and self-driving vehicles.

Ghosn’s alleged wrongdoing also raise questions over administration at the coalition in which the three accomplices’ boards are all chaired by a single executive.

Talking at a late-night news meeting on Monday, Nissan CEO Hiroto Saikawa admitted that too much power had been focused on Ghosn and that the suggestions of his stewardship of both Renault and Nissan had gone unquestioned since 2005.

Prosecutors said in a declaration that Ghosn and Representative Director Greg Kelly planned to downplay Ghosn's recompense over five years beginning in fiscal 2010 as being about half of the actual 9.998 billion yen ($88.9 million).


Ghosn joined Nissan in 1999 and turned into its CEO in 2001. He stayed in that post until a year ago and had received 9.2 million euros ($10.53 million) in pay for the final year as CEO.

"By under-reporting his corporate salary, he basically deprived Nissan's shareholders of opportunities to judge if the amount of his salary was appropriate," Toru Ibayashi, executive director of Wealth Management at UBS Securities Japan, said of Nissan's allegations.

Japanese public newscaster NHK reported Nissan paid billions of yen for the purchase and renovation of homes for Ghosn in Rio de Janeiro, Beirut, Paris and Amsterdam, citing anonymous sources.

The properties had no business purpose and were not listed as benefits in filings to the Tokyo bourse, NHK said. President Saikawa declined on Monday to talk over specifics on Ghosn's personal use of company money.

Nissan spent 2 billion yen on homes for Ghosn in Rio and Beirut via a Dutch subordinate, with Kelly managing the transaction, the Nikkei newspaper reported, citing anonymous sources.

There has been no remark from Ghosn or Kelly on the allegations and a news agency couldn't get in touch with them for a statement.

In an indication of the wider political fallout, Hitoshi Kawaguchi, Nissan senior vice president handling administration relations, met with Japan's top government spokesperson on Tuesday, telling media he had asked for good relations between Japan and France be maintained.

The Asahi newspaper referred to anonymous sources as saying a company worker gave prosecutors information on Ghosn in return for lighter treatment, the second example of an appeal deal in Japan – a system presented in June.

Nissan shares tumbled to a two-year low of 940 yen and were later trading dropped 5 percent at 955 yen.

Shares of Mitsubishi, which also said on Monday it would detach Ghosn as its chairman, slipped by around 6 percent. Renault shares lost 8.4 percent on Monday.

Ghosn's undoing was improbable to lead a sharp drop in vehicle sales, capping the drawback for Nissan shares, said Fujio Ando, consultant at Chibagin Securities.

"The fact that the case came to light because of a whistleblower is also positive on the whole, in terms of corporate governance. If this had been revealed by outsiders, that would have been a different story," he said.

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