Nissan’s Ghosn eyes salvage task with $2.2b Mitsubishi stake

Carlos Ghosn, the man who helped pull Nissan Motor back from the brink 16 years ago, is taking on a new salvage job: Mitsubishi Motors.

Nissan agreed to buy a 34 per cent stake in Mitsubishi Motors for about 237.4 billion yen ($2.2 billion), the automakers said on Thursday. The capital infusion could prove a crucial lifeline to Mitsubishi Motors, whose market value had fallen more than 40 per cent after saying it overstated the fuel economy of its minicars and had been improperly testing Japan models since 1991.

The purchase will make Nissan the top shareholder in Japan’s smallest automaker at a discount. Further collaboration between the two would deepen an existing partnership that already involves joint manufacturing and vehicle development – and represent another step toward a much-needed realignment of Japan’s crowded car industry.

“It’s a bargain deal for Nissan, though of course there are risks,” Koji Endo, an analyst with Advanced Research Japan, said by phone. “This deal would create a win-win situation for all stakeholders including Mitsubishi group and the government, which wants to protect jobs.”

Dented reputation

The deal comes as Mitsubishi Motors grapples with a serious hit to its reputation, declining sales and the potential for billions of dollars in costs from the scandal involving the fuel mileage performance of four minicar models, two of which are supplied to Nissan. After suspending deliveries of the affected models for the last two weeks of April, Nissan reported a 51 per cent plunge in its monthly minicar sales.

“We obviously care about the viability of the company,” Ghosn, Nissan’s chief executive officer, said in an interview. If Mitsubishi Motors isn’t healthy, “we have a problem. Then, we have no kei cars for the Japanese market.”

Ghosn, 62, already has a track record for shaking up Japan’s auto industry. Taking over as Nissan’s president in 2000, he brought the then-struggling company company back from the brink by breaking up its so-called keiretsu network of suppliers, shutting plants and leveraging an alliance with Renault.

Extending aid

In coming to Mitsubishi Motors’ aid, the challenges ahead for Ghosn extend beyond getting minicars back on the market. The company has said nine more models may have been improperly tested in Japan, after initially disclosing that it had overstated the fuel economy of its minicars by as much as 10 per cent.

Japan’s jam-packed auto industry faces increasing outlays to compete in an era where electrification, autonomous-driving technology and ride-sharing upstarts are on the rise.

“Since the auto industry is getting more and more competitive and requires new technologies, we knew we could not survive alone and were aware of the need to look for the partner sooner or later,” Mitsubishi Motors Chairman Osamu Masuko said in an interview.

Masuko briefed the group companies on the partnership with Nissan, he said. “The Mitsubishi group is on the same page,” he said.

After the deal is completed, Nissan will wield veto power over major decisions at Mitsubishi Motors with its 34 per cent stake. The combined shareholding of Mitsubishi Group companies – Mitsubishi Heavy Industries, Mitsubishi and Mitsubishi UFJ Financial Group – will fall to 22.4 per cent from 34 per cent.

‘Right direction’

The Nissan-Mitsubishi alliance is “a move in the right direction,” said Mitsubishi Heavy spokesman Genki Ono. The company will wait for the fraud investigation report and discuss the misconduct with other shareholders and take necessary measures, he said.

Mitsubishi said the deal is “forward looking,” while Mitsubishi UFJ said it views Nissan’s stake purchase “positively and expect this capital, business alliance to develop into something that solves the issues.”

Home to worldwide sales leader Toyota and other global players such as Honda Motor Co., Japan has twice as many automakers as car-loving Germany, which has three. In the far bigger US market, Ford Motor, General Motors and Tesla Motors are the only independent companies left.

Cracking Asean

Buying part of Mitsubishi Motors boosts Nissan’s exposure to Southeast Asian markets seen as strong longer-term bets for growth. Paced by Thailand-built Triton pickups and Pajero SUVs, Mitsubishi Motors sold twice as many vehicles in the region than in Japan during the fiscal year ended March 30.

The Philippines would be among the countries where Nissan would benefit most, said Kazuaki Funahashi, an analyst with researcher Fourin. Home to more than 100 million people, its car market is expected to expand. Mitsubishi Motors trails only Toyota Motor, while Nissan lags further behind.

Nissan’s purchase of the Mitsubishi Motors stake mirrors Toyota’s deal in January to acquire the remainder of its minicar-making affiliate Daihatsu Motor for about $3.2 billion in stock.

By 2020, Japan’s ranks of carmakers may shrink to no more than three company groups, driven by the rising costs of competing to make cars cleaner, safer and more connected, Takaki Nakanishi, an analyst at Jefferies Group LLC, said after Toyota and Daihatsu announced their deal.

“It’s difficult for small and mid-sized carmakers to do everything on their own,” Yasuyuki Yoshinaga, CEO of Fuji Heavy Industries Ltd., told reporters Thursday. The maker of Subaru vehicles has jointly developed sports cars and hybrids with Toyota. “We would like to value and maintain that relationship,” he said.

Source: Times Of Oman