Nissan Motor Co. will take a 34 percent stake in scandal-ridden Mitsubishi Motors Corp. in a deal that aims to repeat the success of the Nissan-Renault alliance.
Nissan Chief Carlos Ghosn said on Thursday in a joint press conference with Mitsubishi Motors Chairman Osamu Masuko in Yokohama that Nissan will invest 237 billion yen ($2.2 billion) to become the top investor in the other firm.
“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,” said Ghosn, who engineered Nissan’s alliance with Renault, which began in 1999.
Adding Mitsubishi will be a plus in sharing platforms, purchasing and technology, and Nissan will benefit from its strengths in southeast Asia, Ghosn said. He said he has a close relationship with Masuko and they have a good relationship built on trust.
“We will help this company address the challenges it faces particularly in restoring consumers’ trust in fuel economy performance,” said Ghosn.
Mitsubishi group companies — Mitsubishi Heavy Industries, trading company Mitsubishi Corp. and the Bank of Tokyo-Mitsubishi UFJ — will continue to hold stakes in the automaker, but they have agreed to support the alliance with Nissan, both sides said.
Mitsubishi Motors has been recently rocked by a scandal over cheating on mileage tests to inflate mileage for minicar models. And reporters peppered Ghosn with questions on whether he was worried that the scandal may grow.
The automakers will maintain separate identities, brands and dealerships, Ghosn and Masuko said.
Under the deal, Nissan will purchase 506.6 million newly issued Mitsubishi Motors shares for 468.52 yen a share. The deal is still subject to a formal signing of an agreement, regulators’ and shareholders’ approvals, but expected to close by the end of the year.
Masuko apologized for the scandal but welcomed the alliance with Nissan.
Tokyo-based Mitsubishi Motors, which makes the makes the Outlander sport-utility vehicle and the i-MiEV electric car, acknowledged last month that it had systematically falsified mileage data on its eK wagon and eK Space light passenger cars, which were produced for Nissan as the Nissan Dayz and Dayz Roox.
Nissan would face a major challenge in repairing Mitsubishi’s tarnished reputation and winning back consumer trust.
In the early 2000s, Mitsubishi disclosed a shocking scandal involving cover-ups of defects such as failing brakes, faulty clutches and fuel tanks prone to falling off, dating back to the 1970s. That resulted in more than a million vehicles being recalled retroactively.
In the unfolding mileage scandal, Mitsubishi has said the rigging dates back 25 years, and may involve all its models, including discontinued ones.
Ghosn has saved Nissan from near-bankruptcy, imposing cost cuts that have been more efficient, if not brutal, than old-style Japanese management, which relies on cautious, harmonious decision-making by committee and vaguely defined responsibilities.
The tie-up was announced on Thursday as Nissan forecast operating profit to decline 11 percent this business year as the Japanese automaker feels the sting of a strengthening yen.
After operating profit jumped 35 percent to 793.3 billion yen ($7.3 billion) in the 2015/16 financial year, Nissan said it expected profit for the current year to fall to 710 billion yen.