Nissan’s board will meet on Thursday to decide whether to remove Carlos Ghosn as chairman after he was arrested on allegations of financial misconduct.
The board is expected to dismiss Mr Ghosn from his post.
He has been accused by Nissan of under-reporting his salary and using company assets for personal use.
But some see it as part of the firm’s attempt to rebalance power in its alliance with Renault and Mitsubishi, which Mr Ghosn also chairs.
A towering industry figure, the arrest of the Brazilian-born businessman this week has sent shockwaves through the sector.
The 64-year-old is credited with turning around both Nissan and Renault, and was the architect of the tie-up between the three firms where Renault is seen as a dominant partner.
What are the accusations?
Nissan has accused Mr Ghosn of “significant acts of misconduct”, including under-reporting his pay package and personal use of company assets.
On Monday the firm said it had been conducting an internal investigation for several months, prompted by a whistleblower.
Senior executive Greg Kelly, which Nissan accuses of having been “deeply involved” in the misconduct, has also been arrested.
Prosecutors have said the two men conspired to understate Mr Ghosn’s compensation, starting in 2010.
Mr Ghosn has not been charged and remains in custody in Japan.
What has the reaction been?
Nissan chief executive Hiroto Saikawa has said he felt “indignation” and “resentment.”
He said Nissan would now try to “stabilise the situation, and normalise day-to-day operations” for staff and business partners.
Both Nissan and Mitsubishi said they would propose the removal of Mr Ghosn as chairman.
Renault said Mr Ghosn would remain as its chairman and chief executive but appointed a temporary deputy chief executive to take over the running of the carmaker.
French Finance Minister Bruno Le Maire said Mr Ghosn was “no longer in a position” to lead the carmaker in which the French state has a 15% stake.
But he said Renault’s partnership with Nissan remained in the interests of both France and Japan and of both companies.
The market hasn’t taken the news well. Shares in Nissan have fallen more than 5% so far this week, while Renault were down more than 8% this week.
Will the Alliance survive this?
Mr Ghosn is the chairman and chief executive of the Renault-Nissan-Mitsubishi Motors strategic alliance.
But the future of the partnership remains unclear in the aftermath of the revelations.
Despite selling fewer vehicles, Renault has a 43% shareholding in Nissan, while Nissan’s stake in Renault is only 15%.
Mr Ghosn was seeking to strengthen it before his arrest, according to the Financial Times, which reported that he had been planning a merger between Renault and Nissan – a deal which Nissan’s board opposed.
But sources told the BBC that a full merger – to create a single company – “was never on the cards”.
Nissan boss Mr Saikawa insisted the partnership would “not be affected by this event”.
But Mitsubishi Motors chief executive Osamu Masuko said the alliance would be difficult to manage without Mr Ghosn.
Who is Carlos Ghosn?
- His hero status was so big that his life was serialised in one of Japan’s famous cartoon comic books
- The Brazilian-born boss of Lebanese descent and a French citizen says his background left him with a feeling of being different, which helped him adapt to new cultures
- In France he was known as Le Cost Killer, a comment on the deep cuts he made to revive Renault
- He was once tipped as a potential president of Lebanon, a move he eventually dismissed because he already had “too many jobs”
- In a 2011 poll of people the Japanese would like to run their country Mr Ghosn came seventh, in front of Barack Obama (ninth)