TOKYO (BLOOMBERG) - Two years after the stunning arrest of Carlos Ghosn over alleged financial misconduct, discussions are underway inside Nissan Motor that could fundamentally reshape the world's biggest car alliance and unwind a key part of its former chairman's legacy.

The automaker is exploring ways to sell some or all of its 34 per cent stake in Mitsubishi Motors, people with knowledge of the matter said. Concern is mounting within Nissan that it will take longer for the company to recover from the pandemic-induced crisis, said the people, who asked not to be identified because the discussions aren't public. A sale may be the first step in a broader review of the three-way alliance that also includes France's Renault, they said.

Representatives for Mitsubishi Motors and Renault declined to comment. There are no plans to change the capital structure with Mitsubishi, Nissan spokeswoman Lavanya Wadgaonkar said.

When Ghosn rescued Mitsubishi Motors in 2016 with a US$2.3 billion (S$3.1 billion) investment and invitation into the alliance, it didn't take long for him to boast about the "new force in the global auto industry." He had even bigger plans - to create a holding company for a carmaking empire capable of dethroning Toyota Motor and Volkswagen as the world's biggest producer of automobiles.

All that changed on Nov 19, 2018, when Ghosn and former Nissan director Greg Kelly were arrested in Tokyo and accused of underreporting the former chairman's compensation. Both have denied wrongdoing. Additional charges were filed later accusing Ghosn of using company assets improperly, which he has denied.

Chaos gripped the alliance. Ghosn loyalists were ousted while Nissan and Renault executives jockeyed for control to fill the power vacuum. There was deep resentment at the French automaker, which was kept out of the loop as Nissan insiders spent months working with Japanese prosecutors to orchestrate the powerful chairman's ouster.

Ghosn was released, re-arrested and freed on bail again in 2019. He escaped trial by making a daring undercover escape in December of that year on a private jet and made his way Lebanon. The one-two punch of a drop in global auto demand and the pandemic has wiped more than US$44 billion from the combined market value of the three alliance partners.

"The best thing is to end the alliance," said Tokyo Tokai Research analyst Seiji Sugiura, a frequent critic of the partnership who has written extensively about the companies in Japanese periodicals. "They should either become one, or split."

One unsettled variable for Nissan is finding a buyer, according to the people familiar with its deliberations. The automaker could sell to one of the group's companies such as Mitsubishi Corp, which already holds 20 per cent of Mitsubishi Motors. Finding another purchaser or turning to the open market also are options. Nothing has been decided, the people said.

A sale would only bring in a relatively modest sum of cash. The holding was worth about US$950 million at the close of trading last week, less than half what Nissan paid four years ago.

Mitsubishi Motors has forecast a US$1.3 billion operating loss for the fiscal year ending in March and was forced earlier this year to shut down production of the Pajero SUV and other larger vehicle lines, leaving it to focus on smaller cars and markets in Southeast Asia.

Nissan's results, released last week, suggest restructuring efforts are gaining some traction, although the the automaker is still projecting a US$3.2 billion operating loss for the fiscal year. It has been on a debt-issuing spree, raising a total of almost 900 billion yen (S$11.6 billion) in funding.

While a share sale would fundamentally reshape Nissan's capital ties with one of its key partners, the three automakers will probably make the case that the alliance remains intact operationally, the people said. They will emphasize the partnership can work without the shareholding and that the sale may also free them to collaborate with other partners, one of the people said.