Nissan to purchase 34 percent stake in Mitsubishi Motors

  • May 12, 2016
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Nissan, Japan’s second-largest automaker, has come to the aid of its beleaguered minicar partner by agreeing to buy a 34% stake, making it Mitsubishi’s single largest shareholder

Mitsubishi Japan headquarters

Nissan Motor Co has committed to acquiring a key stake in scandal-hit Mitsubishi Motors Corp in a $2.18 billion deal that will bails out its minicar partner (and otherwise rival), and boosts Nissan's presence in the small car market. Mitsubishi’s board members have approved the deal at a meeting earlier on Wednesday while Nissan's board will meet today (Thursday), just before the latter releases its quarterly earnings report.

Just last month, it was revealed that Mitsubishi was cheating on fuel economy tests in Japan by fiddling with tyre pressures during testing to overstate actual efficiency. According to news reports, fuel economy was overstated by as much as 10 percent in certain Mitsubishi models. The scandal has badly hit Mitsubishi, wiping $3 billion off its value and bruising a brand already losing market share. The scandal has also affected Nissan, which sold two of the minicar models under a partnership agreement. Buying a piece of Mitsubishi Motors also hands Nissan more exposure to India, Indonesia, Thailand and other Southeast Asian countries that boast greater growth prospects than the companies’ domestic market.

After the deal is concluded, Nissan and Mitsubishi group companies, including Mitsubishi Heavy Industries Ltd., would collectively own a majority stake in Mitsubishi Motors, Nissan said. Nissan will get representation on the Mitsubishi Motors board proportional to its stake, and the chairman of Mitsubishi Motors will be a Nissan nominee under the planned agreement, Nissan added.

“Nissan is determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly restoring consumer trust in the fuel-economy performance,” Nissan Chief Executive Carlos Ghosn told the press at a news conference in Yokohama.

Representatives of Nissan and Mitsubishi Motors said they plan to sign an agreement by May 25 in which Nissan can name four directors to Mitsubishi Motors’ board. A Nissan-appointed director can also be named chairman of Mitsubishi Motors, according to the filing. The deal will be invalid if not completed within a year. 

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