Carlos Ghosn, is “no longer in a position to lead the group,” French Finance Minister Bruno Le Maire said Tuesday.
Renault’s board will meet later in the day to decide whether to remove Ghosn as chairman and chief executive.
The 64-year-old, until now feted for his success in turning around failing companies, is now seeing his towering legacy unravel following his arrest in Japan for "significant acts of misconduct."
"No matter what it will turn out to, confidence in Carlos Ghosn will be hurt," says Berry Van Gestel, former chairman of Corvette and Cadillac in France.
Investors are already spooked. Renault shares plunged by another 10% on Tuesday, after sinking to 8.4 per cent the day before, the lowest since January 2015
"When you grow very high, you can fall very deep," Van Gestel told RFI.
Few critics have questioned Ghosn's record in bringing Nissan back from the brink of bankruptcy but the ruthlessness in which he went about restructuring firms like Nissan has come under scrutiny. So too has his pay packet.
For Hiroto Saikawa, handpicked by Ghosn to be his successor as Nissan CEO, his arrest shows that power was too concentrated in one person.
"I have to say that this is a dark side of the Ghosn era which lasted for a long time," Saikawa told reporters at Nissan's headquarters.
It was an almost unthinkable turn of events for the Brazilian-born auto boss, well regarded for having turned Nissan around from near bankruptcy.
"People have a very short memory when things are not going well," comments Van Gestel.
"People working for him, whether it is his partners or employees, will always believe the bad things first and forget what good things he did in the past," he said.
In France, where the state owns 15 per cent of Renault, officials were quick to demand continuity in the Nissan-Renault-Mitsubishi pact that observers have said has long favored the French side.
Finance Minister Le Maire emphasised that the French government has “not asked for the formal departure of Ghosn from the board of directors”, saying Paris has thus far seen “no proof” of wrongdoing.
Despite Renault’s most senior executives offering their “full support” for Ghosn, an interim management is to be put in place to replace him.
Thierry Bolloré, who also acts as Ghosn’s deputy, was one candidate who could take the reins of Renault. Patrick Thomas, the former boss of high fashion luxury goods brand Hermès, is expected to oversee the board of directors.
Meanwhile, the French carmaker’s Japanese alliance partner Nissan has indicated that it will remove Ghosn as its chairman at a board meeting on Thursday.
"Confidence is gone," former Cadillac chairman Van Gestel told RFI, saying it will be difficult for Carlos Ghosn "to recover from this."