Renault Spy Scandal Is a Complete Fiasco For Ghosn

By Chris Haak

We haven’t given much attention to the EV spy scandal that has rocked Renault and drawn the attention of the French government.  But it’s become a pretty big deal, and has now cost Renault and Nissan CEO Carlos Ghosn his Renault bonus, and quite nearly cost his top lieutenant at Renault his job.

Luckily for Ghosn, having rescued both companies from the brink of failure over the years, and continuing to hold himself and other executives accountable for financial results, he’s built up considerable political capital and goodwill among investors and his board.  It seems that he has now had to cash in much of that goodwill, however, to survive this one.  And that survival is not a certainty at this stage.

In case you hadn’t heard the background of the story, we’ll try to recap it in a few paragraphs.  An anonymous tipster submitted a report to Renault’s security head, Dominique Gevrey, that accused three executives of industrial espionage, including the spectacular claim that the three individuals had deposited their bribes into secret Swiss bank accounts.  The tipster did, however, leave open the possibility that he could have been mistaken in his accusations.  The tipster received a payout of more than 300,000 euros.

Nevertheless, three executives in Renault’s product-development team who had access to Renault’s EV plans – Michel Balthazard, Bertrand Rochette, and Matthieu Tenenbaum – were terminated following a company investigation concluded they had received payments from Chinese companies via foreign accounts.  The Chinese angle of the accusation led to diplomatic problems for the French government as well.

The story doesn’t end there, however.  Renault completely bungled the investigation, and now Dominique Gevrey – the security manager – is in jail and now facing charges of “organized fraud.”

Renault CEO Carlos Ghosn has forfeited his 2010 bonus, as has Renault COO Patrick Pelata and other executives involved in the case (though unnamed).  These executives will also not receive stock option grants this year.  The company also announced disciplinary action against three of its security officers, and has offered to reinstate the three fired product-development executives.  COO Pelata turned in his resignation to Ghosn, but Ghosn declined to accept it, “in the interests of Renault.”  Pelata and Ghosn have a long history of working together, and Pelata controls Renault’s day-to-day operations.  There’s no obvious succession candidate ready to step in behind Pelata, so Ghosn had little choice but to decline to accept the resignation.

Back in January, Carlos Ghosn insisted to TF1 television that the company’s case against the fired executives was sound, saying there were “multiple” findings supporting the espionage claims.  Instead, a French police investigation led by Paris chief prosecutor Jean-Claude Marin discredited the allegations after investigation.

Renault’s Patrick Pelata had said earlier that if the three accused were cleared, managers involved would be held accountable, up to his level.  Hence, his resignation attempt and subsequent compensation reductions.

Instead of crowing that he and his lieutenant were right about the accusations of espionage, Renault’s Ghosn was forced to make a public, personal apology to the accused individuals and promised reparations to “restore their honor in the eyes of the world, taking account of the serious prejudice they and their families have suffered.”

It appears now that at least two of the three fired executives are planning to force “reparations” that are more on their terms, likely multiples of what Renault was hoping to pay them.  A seven-figure settlement (in euros) is not out of the question for Balthazard, says Automotive News.

Meanwhile, France’s Socialist Party head Martine Aubry has called for Carlos Ghosn to resign his post.  All of this drama is not helping Renault to sell cars in an extremely-competitive, stagnant-if-not-shrinking market in Europe.  If Ghosn allows this sideshow to continue cutting into his attention and he loses focus on execution that has made him a successful executive, it won’t be the spy scandal that brings him down.  It will be poor results.