Nissan to take controlling stake in Mitsubishi

Nissan has agreed to become Mitsubishi’s largest stakeholder by investing $ 2.2billion (Rs 14681.7crore) for a 34 percent stake in the latter after it was hit by the fuel-economy manipulation scandal. The deal is expected to be signed on May 25 and is expected to bring a sea of changes in the Japanese auto industry.

When Mitsubishi’s inflated fuel-efficiency scandal broke-out recently, a total of $ 3billion (Rs 20029.5 crore) was wiped off its balance sheet. Mitsubishi has been looking to raise funds since then and that has put Nissan in the driver’s seat, allowing it to negotiate prices at its own terms.

Both the parties have already been co-operating on development and manufacturing since 5 years but had not imbibed any cross shareholding till date. The deal has been advantageous for both the manufacturers. Mitsubishi shall now get access to Nissan’s technology and R&D programs, along with the much needed financial fuel, while Nissan gets to be the founding shareholder at a bargain price. It also gets access to Mitsubishi’s network across South East Asia, in markets like Indonesia, Malaysia and Thailand, where Japanese cars are extremely popular. The alliance has also agreed to co-operate in areas like purchasing, common vehicle platforms, technology-sharing and joint plant utilisation. Through this deal both manufacturers stand to gain in terms of reduced purchasing costs and economies of scale. Nissan will also gain access to Mitsubishi’s knowledge of plug-in hybrids while Mitsubishi will gain from Nissan and Renault’s stronghold in Europe and the Americas.

Another feather in the cap for the alliance will be the position of the Renault dominated group. Nissan and Renault have been long-term alliance partners. Mitsubishi will be a de-facto member of the group and together they’ll be making 9.5 million cars, putting them on a par with the biggest auto manufacturers in the business, Volkswagen, Toyota and GM.

The new shareholding pattern now stands as follows: Nissan: 34per cent, Mitsubishi: 22.4per cent, Others: 43.6per cent.

How does that affect the Nissan and Mitsubishi cars in India? Carlos Ghosn stated that the deal has just been announced and that a clearer picture will emerge in the coming months about how it will affect India. He did however say that there will be a clear separation of the companies globally and that marketing and sales will be specific to each brand. He also said that product development will be specific but technology development will be common and that there will be no shutting down of plants, although cross-manufacturing at existing plants will happen if it does make sense.