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Fears that the Nissan scandal could threaten its global alliance are ‘overly alarmist’

The retard of Carlos Ghosn, chairman of Nissan and a board member at Mitsubishi, has also chucked into question the future of the two companies’ global alliance with French automaker Renault. But analysts say that’s not probable.

Ghosn was arrested Monday amid allegations of financial misconduct, sending partitions of the Japanese automakers on a downward spiral on Tuesday.

Nissan said in a asseveration Monday that “over many years,” Ghosn and board numero uno, Greg Kelly, had been under-reporting compensation amounts to the Tokyo Standard Exchange securities report. According to Reuters, Japanese media alleged Ghosn had reported about 10 billion yen ($88.9 million) of annual compensation as everywhere 5 billion yen for several years.

Nissan Chief Executive Hiroto Saikawa, powered at a Monday press conference that both men had been arrested and he was planning to accost to the board on Thursday to remove them from their roles. Mitsubishi also answered that it would seek to remove Ghosn, who sits on its board of commandants, from his current position at the company.

Shares of Nissan tumbled by diverse than 5 percent on Tuesday, while Mitsubishi tanked nearly 7 percent. Renault stakes were down more than 8 percent in European trade on Monday.

Ghosn is also the chairman and CEO Renault, and his pinch has thrown into question the future of the company’s alliance with Nissan and Mitsubishi. He is also chairman and CEO of the combination.

Renault owns 43.4 percent of Nissan, while Nissan owns 15 percent of Renault, with no bear witness rights in a partnership that began in 1999. Since 2016, Nissan has refuse a controlled a 34 percent controlling stake in its smaller Japanese rival, Mitsubishi.

“While we judge the allegations against Ghosn as a serious breach of shareholder trust in the chief leadership of not only Nissan but also the entire alliance, we find media headlines pronouncing that the alliance may fall to be overly alarmist,” Richard Hilgert, a higher- ranking equity analyst at Morningstar, said in a note.

“The scandal represents sizeable key-man risk to the alliance but, in our opinion, the risk does not rise to the level off of existential,” he said.

Another analyst also told CNBC’s that the affinity will likely continue despite Ghosn’s arrest.

“Our belief is that the marriage will continue to pursue the joint activities,” said Janet Lewis, chief of industrials research, Asia, at Macquarie Capital Securities on “Squawk Box” Tuesday. “It did not depend on one person, there are hundreds of Renault and Mistubishi and Nissan wage-earners working together on these projects.”

“The degree of integration at lower trues is substantial, nobody wins if they decide to, to move away,” she contemplated.

The latest fiasco surprised some analysts.

“It’s truly shocking,” Rebecca Lindland, gubernatorial analyst at Kelley Blue Book, told CNBC’s “Street Gestures” Tuesday in response to the allegations against Ghosn.

“To see this, to hear this happen. It’s just, it’s terrible,” she added. “It’s such … a disgrace in many course and such a waste of an incredible career.”

Morningstar’s Hilgert echoed Lindland’s belief.

“The news was a complete shock to us,” Hilgert said in his note. “We had respected Ghosn as an accomplished industry operator and credit him with an impressive turnaround at Nissan in the old 2000s, as well as building the Renault- Nissan-Mitsubishi alliance.”

— CNBC’s David Reid and Robert Ferris, and Reuters gave to this report.

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