Nissan Buys Controlling Stake in Mitsubishi Motors in USD 2.2 Billion Deal

Nissan Motor Co has finalized a deal to buy a controlling stake of 34 per cent in Mitsubishi Motors Corp, thus taking over control of the smaller Japanese auto manufacturer. Mitsubishi has recently been embroiled in a scandal for manipulating fuel economy data and could possibly revamp its image as an outcome of the deal. Mitsubishi had admitted last month that it had overstated the fuel economy of at least four of its minicars that are sold in the Japanese market, including two sold under Nissan’s badge.

Nissan stands to benefit from the deal by gaining access to markets in Southeast Asia like the Philippines and Thailand where Mitsubishi models have significant market share. Nissan will also be able to improve its performance in the Japanese market when it comes to kei cars or mini cars, where currently, Daihatsu and Suzuki are the frontrunners.

Mitsubishi and Nissan do have a longstanding history of collaboration dating back to 2011 when the two companies signed a deal to work together on development and manufacturing. As part of the deal between Nissan and Mitsubishi, Mitsubishi will issue new shares to Nissan at a 5.3 percent discount on the rate on May 11 thus handing over enough shares to Nissan to take control of the company under Japanese shareholding rules.

According to Nissan Chief Executive Carlos Ghosn, the two companies will now jointly develop and share technology and benefit from “billions” in synergies by cooperating closely with regard to procurement, plant utilization and increasing their presence in growth markets.

“We are determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly in restoring consumer trust in its fuel economy performance,” Ghosn said, addressing a joint press conference in Yokohama, south of Tokyo.

Nissan will also appoint new members to the board of directors at Mitsubishi Motors, with the company nominating about a third of the members and the board being possibly led by a Nissan executive.

One possible down side of the deal would be the difficult challenge of reversing the fortunes of Mitsubishi without assuming full control of the company. Ghosn, however, remained highly positive about the deal saying that the deal with Mitsubishi would pave the way for Nissan to become one of the top three companies in the automotive sector.

Nissan will also appoint new members to the board of directors at Mitsubishi Motors, with the company nominating about a third of the members and the board being possibly led by a Nissan executive.

One possible down side of the deal would be the difficult challenge of reversing the fortunes of Mitsubishi without assuming full control of the company. Ghosn, however, remained highly positive about the deal saying that it would pave the way for Nissan to become one of the top three companies in the automotive sector.