Nick Kostov and Sean McLain's excellently reported new book about Carlos Ghosn is a fascinating and fast-moving account of one of the auto industry's most successful executives, his alleged crimes, and his eventual escape from authorities.
Boundless: The Rise, Fall, and Escape of Carlos Ghosn by Nick Kostov & Sean McLain, Harper Business
I never thought I’d read another book about Carlos Ghosn after completing Hans Greimel and William Sposato’s brilliant Collision Course. But the minute I poked my nose into Nick Kostov and Sean McLain’s Boundless, I was hooked.
Ghosn’s story is riveting. Born to an entrepreneurial Lebanese family in the rainforest of Brazil, he was largely raised in Beirut before matriculating at the École Polytechnique in Paris. He would go on to help engineer “the Alliance” between Renault and Nissan, and rise to lead both companies simultaneously, straddling continents and cultures. He was a rare breed in business—a bona fide turnaround artist with repeated success restoring the fortunes of large industrial companies. He would become better known to the world as an escape artist.
It wasn’t supposed to end this way. Ghosn had intended to retire in Lebanon in a blaze of glory, going down as one of the greatest automotive executives and a business innovator. Instead, Ghosn will forever be known for his most audacious act: escaping Japan in a box.
And it really didn’t have to end this way.
The authors posted “The Inside Story of Carlos Ghosn’s Brazen Escape From Japan” in The Wall Street Journal this week, so I won’t go into that in detail here. What I am more interested in is how a man as unquestionably talented and celebrated as Ghosn ended up such an outcast—literally a fugitive from the law. There are many other white-collar criminals who have committed comparable crimes or worse, who have not fallen quite so far, and even recovered. There are many more whose actions blur the line of legality so much that they are seen as financial innovators. Unlike Enron’s executives, Ghosn’s accomplishments at reorganizing industrial organizations were real rather than financial skullduggery. Unlike Jack Welch, the cost-cutting he enacted was used to save beleaguered industrial companies and bring them back to life, not to bleed dry the company that claimed under his watch to “bring good things to life” only to see what was once seen as America’s premier industrial outfit and corporate citizen slowly die a death by a thousand cuts in his wake. The shady financial schemes Ghosn seems to have constructed were tied to ways to pay himself more, off the books, rather than misleading investors or artificially inflating the stock price of the company. And yet, Ghosn did leave a trail of destruction in his wake. So why did it end this way?
Well, a simple answer is that he never thought he was paid enough as the head of the Alliance between Renault and Nissan. It was not the first time that had been true in his career. Long before he helped orchestrate the unlikely Alliance between Renault and Nissan and eventually became the simultaneous CEO of both companies, he oversaw the “unlikely marriage” of Michelin and Uniroyal Goodrich. As Kostov and McLain tell it:
Michelin was a [French] family-run company whose patriarch preached modesty and insisted upon traditional values. Uniroyal Goodrich’s executive team were cigar-chomping New York finance sharks who knew the numbers and kept a close eye on the stock market. In the words of one Michelin executive, it was like marrying a virgin to a hoodlum.
The cigar-chomping finance sharks may have kept a close eye on the market, but they apparently didn’t keep as close an eye on their own operations, because Ghosn pored over the data and “it became apparent that all but one of Uniroyal Goodrich’s seven North American factories were worthless. The previous owners had starved the plants of the funds they needed to modernize and stay competitive.” Ghosn had already proven his mettle at Michelin, turning around a floundering French competitor, Kléber-Colombes, that the French government had asked Michelin to buy and save from collapse. He was then tasked with turning the company’s operations in his native Brazil around, which he did quickly. But when going over the data between Michelin and Uniroyal, one big difference he discovered between the two companies was how its top executives were compensated. The American managers made far more than the French, and Ghosn felt he needed to close the gap. But he also realized that, relative to similar executives in other countries and cultures, he was underpaid.
Unsurprisingly, given the young Ghosn’s track record, he was able to diagnose the problem with Uniroyal’s operations and stepped in to save them. It required cuts, and it did not come easy—especially at a unionized factory in Fort Wayne, Indiana:,
At the Fort Wayne plant, the shell-shocked manager acknowledged the success created by Ghosn’s firm hand. “I don’t know what kind of peacetime general he is,” he said. “But he’s a great wartime general.”
Back in France, Renault CEO Louis Schweitzer was looking for help turning around the fortunes of the automaker—and a potential successor. After one conversation, he knew Ghosn was his guy, and once again he worked quickly:
Thanks in part to Ghosn, now more than a year into his tenure, France’s largest carmaker was having a rare moment of financial strength. As planned, Ghosn had whipped the company into a lean profit machine. So much so that Renault had built up a pile of cash and was hunting for an acquisition target that would put it in the automotive big leagues and ensure its long-term survival.
Ghosn had become so sought after following his presentation on how he would turn things around at Nissan that the deal hinged on him running the company. Nissan wanted him as CEO, and if he would go to Japan, the deal would go through. The compensation package he asked for was so high that the Japanese asked if he had perhaps mistakenly added an extra zero to the number of Nissan shares he was asking for. It was not a mistake, and other than a request to be paid in dollars rather than the more volatile yen (which would prove to be of great consequence), he got what he asked for. He was on his way.
Ghosn’s first ever media interview was done with Modern Tire Dealer while he was working for Michelin in the United States on the Uniroyal Goodrich merger. I am sure MTD is a fine industry publication, but he was on a different stage now. The alliance between Renault and Nissan would be a much bigger deal, and a much bigger risk. Most auto industry veterans gave it little chance of success:
Most suitors looked at Nissan and saw a pile of debt. They looked at Renault and saw a pile of something else.
His first media appearance in Japan would be in front of an audience of 20 million and hosted by “Japanese television’s most aggressive newsman, Hiroshi Kume.”
Ghosn’s arrival in the spring of 1999 was perceived with as much apprehension and curiosity as might follow an alien invasion.
The Japanese company was reluctant to accept investment from a foreign company, but they were in dire financial straits. And, at the same time, when Ghosn set about learning exactly what assets Nissan had on its books, he found the “carmaker held stakes in 1,394 other companies.”
The answer was in the very nature of Japanese corporations: they bound themselves together into interlinked groups known as keiretsu and had shareholdings in one another.
Once again, Ghosn worked quickly. He set ambitious cost-cutting goals and upended what was expected from a Japanese corporation when he unwinded Nissan's involvement in the keiretsu. But he also found in the Japanese not only willing partners, but enthusiastic and eager participants in turning around the fortunes of a company that they were proud to work for, in an industry that had helped define the country’s image of itself since it helped turn its economy into the world’s second largest in the decades after World War II.
Carlos Ghosn wasn’t just leading a charge; he had people running alongside him.
With the wind at his back, Ghosn smashed his first target. In 2000, Nissan posted a $2.7 billion profit, its largest ever, which astounded the business world.
He had not only overcome the trepidation many had at seeing a foreigner leading one of their most prestigious companies, he had become a celebrity in Japan. He was seen as a savior, and had shaken up not only the culture at Nissan, but the culture writ large. Publishers turned his story into comic books for kids and a manga book that “young salarymen read for inspiration during their commute.”
By 2005, the one thing he failed to do was find a successor so he could take over for Louis Schweitzer back at Renault as planned. But that was almost certainly according to Ghosn’s new plan. Even though Renault had stepped in to save Nissan and owned a large chunk of it, Ghosn had turned the Japanese company into the stronger of the two. But Schweitzer didn’t have an alternative choice and was ready to move on. So, Ghosn would continue running Nissan, and would now become CEO of Renault as well. It was unprecedented, one man being the CEO of two major automakers, based in two different countries, but Ghosn was getting used to doing things that were unprecedented.
He was split between Paris and Tokyo but wanted to build the Alliance between Renault and Nissan into an even larger empire by adding GM or Daimler or another major auto maker to the mix. Most of those other major auto makers tried to recruit him away from the Alliance to run their companies.
Ghosn had been successful in part due to his prowess at breaking down and dismantling bureaucracy and closely managing his cost-cutting and change initiatives across departments, silos, and fiefdoms. Spread as thin as he now was, the bureaucracy was roaring back, and decision-making slowed. Cracks started to emerge. France’s Finance Minister, believing there was a conflict of interest in Ghosn running both companies simultaneously, asked him directly who he was talking to—the CEO of Renault or the CEO of Nissan—and asked him how much money he was making at Nissan. It wasn’t a trick question. The French wanted to capitalize on their successful investment in Nissan and eventually merge the two companies, or at least bring them closer together to ensure a continued partnership that would operate as closely to a single company as possible. The Japanese wanted to remain as independent as possible and didn’t want Renault meddling in their operations. Ghosn, as hard as he tried, could not serve both interests at the same time forever. He could only try to triangulate those interests.
The question of how much he was making at Nissan was not trivial, either, nor was the amount he was making. By 2010, there was only one other person at Nissan who really knew how much Ghosn was paid, but that was about to change due to a new law in Japan “requiring companies to report the income of any director who made more than 100 million yen (roughly $1 million) a year.” Ghosn at that time was making almost $17 million.
The mammoth figure would cause a backlash in both Japan and France. How could he preach frugality and ruthless efficiency—the foundations of his celebrity in Japan—while collecting the country’s largest paycheck?
Fearing that backlash, Ghosn had his official pay from Nissan slashed to just under $10 million annually before the disclosure requirements kicked in. It was still the highest amount for an executive in Japan, and it still caused a backlash. “The public was enraged,” and even the new prime minister claimed he was paid so high because “he’s good at firing people.” That was a little unfair, as the plan to slash jobs when he took over “didn’t contain any Western-style firings—payroll would be reduced by buyouts and early retirements—and there was almost no pushback from the powerful Nissan unions,” but that didn’t matter much.
What mattered more is that Ghosn never gave up on looking for a way to make up for the pay cut he had taken to hide how much he was really making before the disclosure requirements. And those efforts—along with a scheme to cover a shortfall in a swap deal he had entered into with Shinsei Bank to convert his salary from yen into dollars—were what would eventually land him in jail.
At the same time, Ghosn was beginning to lose his grip on the day-to-day operations of the company. In 2011, a corporate espionage scandal erupted at Renault shortly before the tsunami hit Japan hit, and Ghosn was in neither place initially to help manage either crisis.
For all of Ghosn’s posturing, the past few months had laid bare the challenges—if not the impossibility—of running two global corporations on separate continents.
Originally the Alliance’s biggest asset, uncertainty around Ghosn became a liability. Originally immersed in all the intricacies of every department and every decision as he worked to turn companies around, he now hopped from one continent to another and seemed to live on a private jet. The man famous for being down in the trenches was now leading, quite literally, from 30,000 feet. Originally known for cost-cutting, he threw a lavish, €530,000 party—ostensibly for the Alliance’s fifteenth anniversary, even though no current or former executives or employees of either company were invited, and which happened to coincide with his 60th birthday—at the Palace of Versailles. Originally commanding great respect and a devoted, loyal following, his own corporate lieutenants would end up helping to plot his downfall.
At the start, everything he touched turned to gold. And there’s a point where you wish he hadn’t been as celebrated as he was in Japan. The Nissan turnaround led the public to deify a man who in many ways was not equipped to be treated with such reverence.
He leveraged his fame to overreach for power and shirk accountability. In the end, the toxic combination of ego and drive precipitated Ghosn’s downfall and left a trail of destruction.
I am not going to spoil the book by going into all the details, but I will say that I do think all the intrigue would have likely ended differently if Ghosn had not been a foreign executive working in the traditional business cultures of France and Japan. It would have also ended differently if he had not been arrested and imprisoned in Japan specifically, where almost no one is ever found innocent once they enter the system. But it is also true that Ghosn almost certainly did break the law. And on top of that, by orchestrating his hold on personal power the way he did, by remaining the one person who could hold it together, he almost certainly did more than anyone else to break the Alliance between Renault and Nissan he had helped form.
There are some great books out there about becoming indispensable, a Linchpin in your organization, So Good They Can’t Ignore You. Ghosn became all of that and more. But here’s the thing: once you do that, you have to work on building up others more than yourself. It has been said many times in many ways by many people, but since we’re talking about automakers, I’ll go with the way one of their great antagonists, Ralph Nader once put it: “The function of leadership is to produce more leaders, not more followers.” Ghosn had never done that, opting instead to keep power concentrated in his own hands, even as the organization he oversaw grew increasingly unwieldy. By the time he eventually named a new CEO to succeed him at Nissan, even his hand-picked choice had begun to lose faith in Ghosn and was the first one to speak out against him after his arrest.
Ghosn had reached the apex of power for a business executive. At the time of his arrest, his focus was on turning the Alliance into the largest producer of automobiles in the world, which he believed he was on the verge of. But it had become, in the authors’ words, an “unwieldy beast.” After his arrest, the Alliance would collapse. His moral failures and financial crimes were real, and the reporting the book brings to bear on exposing them is as impressive as it is extensive and in-depth. I wasn’t sure I would learn anything new after reading a previous book on Ghosn, but the authors have exposed a lot of new information. It is also extremely well-written, as compelling and quick-moving as a crime novel or thriller. But what I wanted to know is why achieving and having so much was never enough for Ghosn, or for so many others who rise to such heights and remain similarly unsatiated. I am not sure I have that answer, or ever will, but I think we need to keep asking ourselves the question, and that actions like his need to be exposed and examined. Nick Kostov and Sean McLain do an excellent job of that.