Nissan Takes Control Of Mitsubishi Motors

Nissan Motor has emerged as the single largest shareholder of Mitsubishi Motors, owning 34 percent of the embattled Japanese car maker.

Earlier this month, Nissan revealed that Mitsubishi, which produces two Mitsubishi minicar models for Nissan under contract, have been inflating fuel consumption test data submitted to the government. When it comes to fuel consumption and exhaust emissions, the Japanese government practices self-regulation, allowing car makers to submit test results conducted internally. Outside of Japan, most countries including Malaysia require a report by an independent auditor, thus the scandal is limited only to Japan.

As the Japanese government have been giving tax breaks for certain vehicles based on their claimed fuel consumption, the revelation will also mean that Mitsubishi Motors is expected to pay many millions of Dollars in compensation to the Japanese government as well as customers.

The two companies announced today that they have agreed to cooperate in areas including purchasing, common vehicle platforms, technology-sharing, joint plant utilization and growth markets.

Carlos Ghosn, chief executive and president of Nissan, said: "This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors. It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies. We will be the largest shareholder of MMC, respecting their brand, their history and boosting their growth prospects. We will support MMC as they address their challenges and welcome them as the newest member of our enlarged Alliance family."

Osamu Masuko, chairman of the board and chief executive of MMC, said: "Through its long history of successful partnerships Nissan Motor has developed a deep knowledge of maximizing the benefits from alliance partnerships. This agreement will create long term value needed for our two companies to progress towards the future. We will achieve long term value through deepening our strategic partnership including sharing resources such as development, as well as joint procurement."

The agreement also means that the Renault-Nissan Alliance will now be expanded to include Mitsubishi Motors, but since the Alliance has a rather informal arrangement (there is no specific contract that says Carlos Ghosn is head of the Alliance), it is unclear yet what will this mean for the Alliance in the future.

Carlos Ghosn also hinted the new agreement with Mitsubishi would allow Nissan to strenghten its operations in Asia and other emerging markets.

"The performance of Mitsubishi in some markets is better than Nissan. In Southeast Asia, for example, Mitsubishi is doing a great job, especially with SUVs," said Ghosn.

Mitsubishi’s Triton-based Pajero Sport is enjoying brisk sales in the region, and could plug the missing gap in Nissan’s product line-up for this region. The Triton is also selling much better than the Navara. But it’s too soon to say if there will be Nissan-badged Pajero Sport in the future or whether will Nissan cull the Navara and just ride on the Triton’s success.

Several years back, Mitsubishi Motors did signed an MoU with Renault to study the possibility of building the next generation Lancer based on the Renault Fluence. The MoU have since lapsed but this new development could see the plans being revived again.

In Malaysia, Nissan and Mitsubishi already have some existing cooperation via their local representatives. Tan Chong Motor Assemblies, a sister company of Nissan distributor Edaran Tan Chong Motor, assembles the Mitsubishi ASX under contract for Mitsubishi Motors Malaysia.