Nissan buys 34% stake in troubled Mitsubishi
Nissan has completed the purchase of its 34 per cent stake in fellow automaker Mitsubishi in the wake of the fuel economy scandal, creating a new and formidable automotive force in the car industry.
The automaker is set to finalise its purchase by the end of 2016, after which the shareholding of Mitsubishi group companies – trading house Mitsubishi Corp, Mitsubishi Heavy Industries Ltd and Bank of Tokyo-Mitsubishi UFJ Ltd will be diluted to 17 percent from around 34 percent before the deal was announced.
Following this development, it will now support and advise the Mitsubishi board as well as collaborate with its Japanese counterpart on joint purchasing, deeper localisation, joint plant utilisation, common vehicle platforms, technology sharing and expanding the presence of both companies in developed and emerging markets.
The announcement in Yokohama, Japan follows the revelations in April this year that Mitsubishi Motor Corporation (MMC) had falsified the fuel efficiency of two of its own models and two that it made for Nissan. It then emerged that eight more models were involved including the Pajero, Outlander and RVR SUVs and that the company had been involved in the deception for 25 years.
With the acquisition, MMC will now become part of the global Alliance with Nissan and Renault, making the Alliance one of the top three automotive groups in the world in terms of sales, thereby adding more responsibility on the shoulders of Carlos Ghosn as the group’s chief executive officer. More than 10 million vehicles are expected to be sold overall in 2016.
Ghosn will chair Mitsubishi Motors Corp after Japan’s second-biggest automaker by sales buys control of its smaller peer. Ghosn, nicknamed “le cost killer”, will oversee an automaker expecting an operating loss of 28 billion yen ($270.69 million) in the year to March. Behind the loss are provisions to cover any quality-related issues that arise while Mitsubishi recovers from a mileage-cheating scandal that sent its shares spiralling.
The two automakers have not decided who will be president of Mitsubishi, said a source with direct knowledge of the matter and another briefed on it. Both declined to be identified ahead of formal announcements.
According to Ghosn, he said, “We are committed to assisting Mitsubishi Motors as it rebuilds customer trust. This is a priority as we pursue the synergies and growth potential of our enlarged relationship. The two companies have been collaborating on Kei cars for the Japanese market for the past five years.’’
Only recently, Ghosn and boss of MMC Osama Masuka, laid out their future plans and strategy. The far-reaching plans will affect almost every area of Mitsubishi’s operations and include a considerable shake-up of top management across the Alliance to allow Ghosn to direct MMC operations while continuing his role in maintaining the momentum at Nissan.
He said: “At a time of unprecedented change in the global auto industry, this strategy will build on our existing strengths and management capabilities to ensure increased competitiveness, better products for our customers and attractive returns for shareholders.”
Ghosn earned his nickname after ordering plant closures when restructuring Renault. He later steered Nissan to profitability. “This is a man who patched up Renault in the 1990s, and he did a lot for Nissan in the 2000s, so I’m sure he looks at Mitsubishi Motors as a new challenge,” said CLSA analyst Christopher Richter.
“He’s a turnaround artist. This is what he does best,” said Richter. Ghosn at the helm of Mitsubishi Motors’ board would “remove an enormous burden from the Mitsubishi group companies,” he said.
Nissan is one of the largest car manufacturers in the United Kingdom. Its Sunderland plant makes the Nissan Qashqai, Note and Juke, and the 100 per cent electric Leaf.
MIKE OCHONMA