Nissan takes controlling 34% stake in Mitsubishi for $ 2.3 b, pledges support for turnaround

Renault-Nissan Alliance Chairman and CEO Carlos Ghosn (left) and Mitsubishi Motors Corp’s Chairman and CEO Osamu Masuko attend their joint news conference in Tokyo, Japan last week – REUTERS

Reuters: Nissan Motor Co. Ltd. said last week it had completed a deal to take a controlling stake in Mitsubishi Motors Corp., and would be retaining the embattled automaker’s chief executive in a bid to help it recover from a mileage cheating scandal.

Japan’s No. 2 automaker has agreed to make a 237 billion yen ($ 2.29 billion) investment to acquire 34% of Mitsubishi Motors, making it the single largest shareholder in its smaller peer and giving it enough of a stake to wield control under Japanese shareholding rules.

The deal offers Mitsubishi a lifeline after the automaker earlier this year admitted to overstating the mileage on some of its cars, while Nissan is hoping to capitalise on Mitsubishi’s strong presence in developing Asian countries to lift its lagging market share there.

Mitsubishi Motors becomes a member of the alliance between Nissan and French automaker Renault, resulting in combined annual vehicle sales of 10 million, making it among the top three automotive groups by sales volumes and enabling the three companies to leverage their scale to reduce costs.

Nissan and Mitsubishi Motors said their partnership would generate synergies in areas including purchasing and plant utilisation, adding they would jointly develop automated driving technologies and plug-in hybrid vehicles.

Pending shareholder approval, Carlos Ghosn, Chairman and CEO of both Nissan and Renault, will lead the board of Mitsubishi Motors, while Osamu Masuko will remain the company’s president and CEO despite calls earlier this year by some shareholders for him to resign to take responsibility for falsifying the mileage on its vehicles.

Ghosn said keeping Masuko on was an “important condition” in proceeding with the partnership, adding all management decisions would be made by Masuko.

“One of the reasons that I so much wanted Masuko to stay as CEO was because I wanted the people at Mitsubishi to know that Mitsubishi will remain Mitsubishi. Mitsubishi will not become a subsidiary of Nissan,” he told a joint briefing.

“This sends a strong message that it’s not Nissan that’s going to transform Mitsubishi, it’s Mitsubishi that’s going to transform Mitsubishi.”

Nissan stands to capitalise on Mitsubishi’s strength in developing Asian countries, where Nissan has been struggling to increase its market share. Around one-third of Mitsubishi’s global sales come from the rest of Asia - excluding Japan - with a focus on countries including Thailand and the Philippines.

“We’re not happy with our performance in ASEAN (Association of Southeast Asian Nations) countries,” Ghosn said. “I think the collaboration with Mitsubishi will help us in many areas to shore up our own level of competitiveness there.”

Nissan first announced in May its intention to take a controlling stake in Mitsubishi after Mitsubishi admitted to falsifying the mileage of four minivehicle models, including two made for Nissan.