Nissan Motor Company has announced it will buy a $2.2 billion stake in beleaguered automaker Mitsubishi Motors Corporation, giving it a controlling interest in the competing Japanese auto maker.
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In this instance however, Nissan’s stake in Mitsubishi would be larger than the 15 percent stake Nissan holds in Renault, while Renault controls 43 percent of Nissan.
Nissan Chief Executive Carlos Ghosn said the two would now share and jointly develop technology, and could realize “billions” in synergies by coordinating purchasing, plant utilization and cooperating in growth markets.
“We will help this company address the challenges it faces particularly in restoring consumers’ trust in fuel economy performance”, said Ghosn.
Renault rescued Nissan 17 years ago, with Renault-Nissan chairman Carlos Ghosn the man who was charged with turning Nissan around.
When the scandal first broke in April, Mitsubishi’s stock value plunged 40 percent, raising concerns about the company’s future, but on Wednesday the firm ruled out a bailout from its top shareholders. We will achieve long-term value through deepening our strategic partnership, including sharing resources such as development, as well as joint procurement’.
Following the conclusion of this deal, the Nissan and Mitsubishi companies, including the Mitsubishi Heavy Industries, would collectively have a majority stake in the carmaker Mitsubishi Motors, announced Nissan.
The automakers plan to sign an agreement on their alliance by the end of the month following regulatory approval.
They added that their boards of directors were meeting in separate meetings on Thursday to discuss the matter.
“We are determined to preserve and nurture the (Mitsubishi) brand”. Nissan bought the slice for 237 billion yen (around AU$3 billion).
Mitsubishi has seen domestic sales plummet after it admitted to using fuel economy testing methods that were non-compliant with Japanese laws for the last quarter of a century.
Under the deal, Nissan is to purchase 506.6 million newly issued Mitsubishi Motors shares for ￥468.52 per share.
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“But taking a one-third stake feels a bit like a half-measure”. According to news reports, fuel economy was overstated by as much as 10 percent in certain Mitsubishi models.
