Tokyo, Japan – Nissan has agreed to buy more than one-third of Mitsubishi Motors Corp. (MMC) for about $2.2 billion, grabbing a controlling stake in its beleaguered competitor after kicking off a scandal in Japan that had Mitsubishi in need of a rescue.
Similar to Volkswagen’s diesel scandal, Mitsubishi officials have admitted to inflating fuel economy claims on several minicars, opening the company up to regulatory fines and rebates to customers who might lose tax credits. Mitsubishi provided tiny cars to Nissan via a partnership, and during discussions for the next generation of those vehicles, Nissan officials discovered the overstatements and reported the issue to regulators in Japan.
Unlike the VW scandal, the vehicles in question were not sold in the United States, so the issue has not gotten nearly as much attention here. The Mitsubishi eK Space is about 134” long, nearly a foot shorter than U.S. subcompacts such as the Chevrolet Spark. It’s only marginally longer than Smart’s Fortwo minicar.
Following the announcement of the scandal in late April and an expansion of the overstatements to more vehicles early this week, Mitsubishi Motors’ stock price has fallen sharply, so Nissan was able to buy its controlling stake at a discount. Japanese incorporation laws give shareholders with more than one-third of a company’s stock veto power over board decisions. Nissan has agreed to buy 34% of Mitsubishi.
Nissan President and CEO Carlos Ghosn says, “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.”
Ghosn has been leading automotive alliances since 1999 when French automaker Renault bought a controlling stake in Nissan and Nissan bought a smaller stake in Renault. That partnership, widely seen as saving Nissan from insolvency, has worked with other automakers, notably Daimler in plans to build Mercedes-Benz pickups, but it has not established deep financial ties with other companies.
Mitsubishi Motors Chairman and CEO Osamu Masuko says, "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."
The companies expect to sign a formal deal by the end of the month and complete the transaction within a year. Through the partnership, the companies plan to jointly develop new models and share manufacturing space.
Source: Mitsubishi Motor Corp., Nissan Motor Co.