CEO Carlos Ghosn personally implicated in ‘Renaultgate’

16 March 2017

16 March 2017

The French finance ministry’s DGCCRF (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes) anti-fraud body has informed prosecutors that CEO Carlos Ghosn should be held responsible for the carmaker’s suspected diesel emissions cheating. A source in the government agency says that these comments were already included in documents submitted last November, when the body announced that it had found ′suspected breaches’ of French law by Renault. A formal investigation was opened two months later.

Following the publication of more details of the allegations by Libération on Tuesday evening, Renault shares fell 3.7 percent on Wednesday. The Libération article even opened by saying ′is one heading for a Renaultgate?’ A key section of the DGCCRF document states that ′Renault SA has misled consumers on the checks carried out and in particular the regulatory control of pollutant emissions for homologation […]. The company has used a strategy to distort pollution control results.’ The report goes on to highlight the significant difference between the performance of certain Renault engines in the real world versus their test results at the time of homologation. For example, the Renault Captur (Euro 6 standard) and the Renault Clio IV (Euro 5 standard) are reported as having exceeded legal limits of nitrogen oxide (NOx) emissions by 377% and 305% respectively.

Understandably, the report comments that ′these results lead to the suspicion of the installation of a fraudulent device which specifically modifies the operation of the engine, in order to reduce NOx emissions under the specific conditions of the homologation test so that the emissions comply with the regulatory limits.’ Renault is essentially accused of ′calibrating’ its engines purely to achieve type approval to run on public roads in a method known as ′preconditioning.’

Even more damning, however, is the release of internal communications which suggest Renault’s complicity. Libération refers to communication on 25 November, 2015 between the director of legal affairs, the director of communications and the head of institutional relations which ends with: ′This depollution system is therefore very quickly inoperative on the road but it works during tests.’

Ultimately, DGCCRF analysis has identified ′the implementation of fraudulent strategies for more than seven years.’ It is estimated that more than 900,000 vehicles are suspected of having gained type approval by cheating homologation tests, equating to €16.8 billion of revenues. Renault could face a fine that amounts to 10% of its annual turnover, approximately €3.5 billion.

This news must be especially troubling for Carlos Ghosn, who has stepped down from heading Nissan but remains CEO of Renault. Unlike other OEMs that are facing judicial scrutiny, Renault has not delegated authority to its director generals. Therefore, although the DGCCRF says the ′entire chain of command’ was responsible, Ghosn himself is personally implicated to a greater extent.