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Stricken by Fuel-Economy Scandal, Mitsubishi Turns to Nissan Nissan Throws a Lifeline to Scandal-Stricken Mitsubishi
(about 1 hour later)
TOKYO — Nissan Motor announced on Thursday that it had an agreement to extend a $2.2 billion lifeline to its fellow Japanese carmaker Mitsubishi Motors, which has been battered by a scandal over falsified fuel-economy ratings.TOKYO — Nissan Motor announced on Thursday that it had an agreement to extend a $2.2 billion lifeline to its fellow Japanese carmaker Mitsubishi Motors, which has been battered by a scandal over falsified fuel-economy ratings.
The deal, which buys Nissan about one-third of the company, draws Mitsubishi into a global automotive group centered on Nissan and Renault of France. The alliance’s combined production volume, about nine million vehicles a year including Mitsubishi, is similar to that of the industry’s giants, Volkswagen, General Motors and Toyota.The deal, which buys Nissan about one-third of the company, draws Mitsubishi into a global automotive group centered on Nissan and Renault of France. The alliance’s combined production volume, about nine million vehicles a year including Mitsubishi, is similar to that of the industry’s giants, Volkswagen, General Motors and Toyota.
The rescue has parallels with how Renault saved Nissan from collapse a decade and a half ago by buying a large minority stake in the then-ailing Japanese producer. Today, Carlos Ghosn, the executive Renault sent to Japan to turn Nissan around, is chairman of both companies.The rescue has parallels with how Renault saved Nissan from collapse a decade and a half ago by buying a large minority stake in the then-ailing Japanese producer. Today, Carlos Ghosn, the executive Renault sent to Japan to turn Nissan around, is chairman of both companies.
“We have been there not a very long time ago,” Mr. Ghosn said at a news conference on Thursday. “We have the track record to make it work.”“We have been there not a very long time ago,” Mr. Ghosn said at a news conference on Thursday. “We have the track record to make it work.”
Nissan will become Mitsubishi’s largest shareholder, buying a 34 percent stake for 237 billion yen, or $2.18 billion. Mr. Ghosn said adding Mitsubishi to the Renault-Nissan alliance would save “billions” through joint development, purchasing and sales. He noted that Renault-Nissan and Mitsubishi were both big investors in all-electric vehicles, and that Mitsubishi has a strong presence in Southeast Asia, a market that Nissan has been targeting.Nissan will become Mitsubishi’s largest shareholder, buying a 34 percent stake for 237 billion yen, or $2.18 billion. Mr. Ghosn said adding Mitsubishi to the Renault-Nissan alliance would save “billions” through joint development, purchasing and sales. He noted that Renault-Nissan and Mitsubishi were both big investors in all-electric vehicles, and that Mitsubishi has a strong presence in Southeast Asia, a market that Nissan has been targeting.
Mr. Ghosn has often touted the loose alliance structure pioneered by Renault and Nissan as better than outright takeovers. Alliances allow carmakers to reduce costs by combining development efforts, while minimizing the political and cultural clashes that often accompany full-fledged mergers, he has said.Mr. Ghosn has often touted the loose alliance structure pioneered by Renault and Nissan as better than outright takeovers. Alliances allow carmakers to reduce costs by combining development efforts, while minimizing the political and cultural clashes that often accompany full-fledged mergers, he has said.
Renault owns 43 percent of Nissan, and Nissan holds a 15 percent nonvoting stake in Renault. The pairing has survived where several other international tie-ups have failed. Daimler and Chrysler, for instance, merged about the same time Renault rescued Nissan, but the combination unraveled within a decade.Renault owns 43 percent of Nissan, and Nissan holds a 15 percent nonvoting stake in Renault. The pairing has survived where several other international tie-ups have failed. Daimler and Chrysler, for instance, merged about the same time Renault rescued Nissan, but the combination unraveled within a decade.
The deal on Thursday does, however, expose Nissan to potential costs and complications from fixing Mitsubishi’s problems. Mr. Ghosn said that the arrangement would be completed only after a full due-diligence examination, but that he was confident that Mitsubishi’s problems were already well understood.The deal on Thursday does, however, expose Nissan to potential costs and complications from fixing Mitsubishi’s problems. Mr. Ghosn said that the arrangement would be completed only after a full due-diligence examination, but that he was confident that Mitsubishi’s problems were already well understood.
Though the scandal poses risks, it has also allowed Nissan to buy into Mitsubishi relatively cheaply: Mitsubishi’s share price has roughly halved since its first disclosure about fuel efficiency cheating last month. Trading in Mitsubishi shares was suspended on Thursday in response to a glut of buy orders. But shareholder sentiment appeared brighter, with an indicative price jumping 16 percent, which is the daily limit. Nissan’s share price slipped 1.4 percent.Though the scandal poses risks, it has also allowed Nissan to buy into Mitsubishi relatively cheaply: Mitsubishi’s share price has roughly halved since its first disclosure about fuel efficiency cheating last month. Trading in Mitsubishi shares was suspended on Thursday in response to a glut of buy orders. But shareholder sentiment appeared brighter, with an indicative price jumping 16 percent, which is the daily limit. Nissan’s share price slipped 1.4 percent.
Nissan and Mitsubishi already cooperate in several areas, most notably the development and sale of small-engine microcars. It was engineers at Nissan who discovered that Mitsubishi was using unapproved mileage tests that exaggerated fuel performance. Mitsubishi has since admitted that it has been cheating on its mileage ratings in Japan for a quarter of a century, and that all models in its domestic lineup were affected.Nissan and Mitsubishi already cooperate in several areas, most notably the development and sale of small-engine microcars. It was engineers at Nissan who discovered that Mitsubishi was using unapproved mileage tests that exaggerated fuel performance. Mitsubishi has since admitted that it has been cheating on its mileage ratings in Japan for a quarter of a century, and that all models in its domestic lineup were affected.
“This is an important step toward rebuilding trust and stabilizing our business,” Mitsubishi’s chairman, Osamu Masuko, said of Nissan’s investment.“This is an important step toward rebuilding trust and stabilizing our business,” Mitsubishi’s chairman, Osamu Masuko, said of Nissan’s investment.
He said that he and Mr. Ghosn had been discussing ways to extend their partnership for some time, and that the cheating scandal had accelerated the process. As a relatively small producer, Mitsubishi lacked the resources to compete effectively on its own, he said.He said that he and Mr. Ghosn had been discussing ways to extend their partnership for some time, and that the cheating scandal had accelerated the process. As a relatively small producer, Mitsubishi lacked the resources to compete effectively on its own, he said.
“This would have happened one day,” he said.“This would have happened one day,” he said.