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It is shaping up to be a bad year for Nissan.
The arrest of auto industry titan Carlos Ghosn in Tokyo last month was believed by some to be a palace coup designed to remove him from power at Japanese automaker Nissan, just one of the companies Ghosn had a hand in running.
Now it's looking like a big problem for Nissan as well.
Ghosn was indicted Monday on allegations of underreporting income and misusing company funds, but investors weren't necessarily expecting Japanese prosecutors to slap Nissan with an indictment as well.
That could spell trouble for Hiroto Saikawa, Nissan's CEO and a onetime protege of Ghosn's, said Jefferies analyst Philippe Houchois.
"Nissan takes this situation extremely seriously," the company said in a statement. "Making false disclosures in annual securities reports greatly harms the integrity of Nissan's public disclosures in the securities markets, and the company expresses its deepest regret." The company said it will strengthen its compliance efforts and improve the accuracy of its financial disclosures.
Saikawa was the one who stood to benefit the most from Ghosn's downfall. Ghosn, who was chairman of Nissan, had planned to replace Saikawa at a November board meeting, The Wall Street Journal reported. Some industry watchers say Saikawa's career at the automaker is in danger.
"I suspect Saikawa knows his days are numbered as well. Because the indictment of Mr. Ghosn today is also an indictment of Nissan," Houchois said. In the wake of this new indictment, "it is likely heads will roll at Nissan as well."
Nissan's shares traded in the U.S. fell 3.1 percent Monday and were down 2.7 percent in intraday trading Tuesday.
The indictment comes on the heels of scandals involving the falsification of vehicle inspection data. The automaker had to recall more than 1 million vehicles in 2017 over faulty vehicle checks, and reports filed in 2018 revealed even more misconduct.
Morningstar analyst Richard Hilgert told CNBC he thinks investor confidence in Nissan's management has been compromised by both the Ghosn scandal and the inspection fiasco.
Ghosn was in many ways the glue holding together an alliance between French automaker Renault and Japanese manufacturers Nissan and Mitsubishi. Renault saved Nissan from the brink of bankruptcy in 1999, and took a 40 percent stake in the company. Nissan, in turn, took a nonvoting 15 percent stake in Renault. But since then Nissan has become a far bigger financial contributor to the alliance, generating a lopsided share of the group's earnings. Tensions over the now two-decades-old arrangement have simmered as the relationship has grown more uneven.
The scandal has created its fair share share of problems for Renault as well, Houchois said.
"The press has been quick to blame this on Nissan, but the reality is the governance issues are just as severe at Renault, we think," he said.
For one thing, Ghosn was chairman and CEO of both companies for years, and he seems to have held too much power at the company.
The companies will likely have to redefine their alliance if they expect it to survive, Houchois said. He said he expects that to happen some time in the next three months or so. The problem is that there could be considerable turnover in the ranks at both companies in the meantime.
"You will have to come up with a number of new individuals who will run Nissan and run Renault," he said.