Nissan takes stake in Mitsubishi, pledges support for turnaround

Nissan Motor said on Thursday it had completed a deal to take a controlling stake in Mitsubishi Motors, and would be retaining the embattled automaker's chief executive in a bid to help it recover from a mileage cheating scandal.

Japan's No. 2 automaker has agreed to make a 237 billion yen ($2.29 billion) investment to acquire 34 per cent of Mitsubishi Motors, making it the single largest shareholder in its smaller peer and giving it enough of a stake to wield control under Japanese shareholding rules.

The deal offers Mitsubishi a lifeline after the automaker earlier this year admitted to overstating the mileage on some of its cars, while Nissan is hoping to capitalise on Mitsubishi's strong presence in developing Asian countries to lift its lagging market share there.

Mitsubishi Motors becomes a member of the alliance between Nissan and French automaker Renault, resulting in combined annual vehicle sales of 10 million, making it among the top three automotive groups by sales volumes and enabling the three companies to leverage their scale to reduce costs.

Nissan and Mitsubishi Motors said their partnership would generate synergies in areas including purchasing and plant utilisation, adding they would jointly develop automated driving technologies and plug-in hybrid vehicles.

Pending shareholder approval, Carlos Ghosn, chairman and CEO of both Nissan and Renault, will lead the board of Mitsubishi Motors, while Osamu Masuko will remain the company's president and CEO despite calls earlier this year by some shareholders for him to resign to take responsibility for falsifying the mileage on its vehicles.

Ghosn said keeping Masuko on was an "important condition" in proceeding with the partnership, adding all management decisions would be made by Masuko. "One of the reasons that I so much wanted Masuko to stay as CEO was because I wanted the people at Mitsubishi to know that Mitsubishi will remain Mitsubishi. Mitsubishi will not become a subsidiary of Nissan," he told a joint briefing. "This sends a strong message that it's not Nissan that's going to transform Mitsubishi, it's Mitsubishi that's going to transform Mitsubishi."

Nissan is dispatching some of its executives to Mitsubishi to improve its management system, nearly two decades after Ghosn executed a turnaround plan for Nissan which included plant closures and thousands of layoffs when Renault took a controlling stake in the then ailing automaker in 1999.

Masuko will share the top leadership position with current Nissan Chief Competitive Officer Hiroto Saikawa, while Mitsubishi Motors' chief operating officer will also come from Nissan.

Pooling resources and eliminating duplicate operations would result in estimated annual cost savings of 24 billion yen in 2017 for Nissan, the company said, rising to 60 billion yen in 2018. Mitsubishi said it expected annual savings of 25 billion yen.
Reuters