According to a report from Japanese broadcaster NHK which was cited by Bloomberg today, Nissan may be in the market to buy up to a 40 percent stake in Mitsubishi Motors. Reuters also reported the news, which comes while Mitsubishi is fighting off an emissions scandal. A source from inside the negotiations told NHK that Nissan had zeroed in on a 34 percent stake in the company.
Nissan and Mitsubishi are meeting to discuss details and share transfer which may cost Nissan $1.84 billion. If the deal goes through, then Nissan would be Mitsubishi’s top shareholder, surpassing current top stakeholder Mitsubishi Heavy Industries, which has 20 percent of the automaker. Shares of Mitsubishi plummeted by 43 percent when the news broke.
Mitsubishi is flush with plenty of cash – namely 450 billion yen – but the company has been beset by scandals that have greatly diminished the brand. Over 15 years ago, Mitsubishi was believed to have been covering up consumer complaints. The complaints raised serious issues regarding safety. Mitsubishi is currently embroiled in yet another scandal, this time involving false fuel economy data on its Japanese fleet of cars.
Although it was believed that Mitsubishi’s scandal was contained, a report today indicates that the scandal is not over. In fact, Mitsubishi now suspects that nine of its Japanese models have provided improper fuel economy data. This also covers some models which have ceased production.
Nissan and Mitsubishi are far from strangers in the auto world. The two are already involved in a partnership for building several models. Mitsubishi has built minicars for Nissan for several years, since Nissasn does not own a manufacturing facility capable of building minicars.
However, this very partnership is the source of the current scandal, since four Nissan minicars were the first to have incorrect fuel economy numbers, and Nissan was the one who identified the issue and reproted it. As a result, Mitsubishi has already promised to reimburse Nissan for the faulty numbers. The scandal has now spread to Mitsubishi’s SUV model, at least one of which may not have been properly tested. Mitsubishi has struggled in its Japanese sales because current estimates indicate it overstated fuel economy by as much as 10 percent across the board.
The two companies are hoping to build electric cars, but they have a ways to go to compete with Toyota and Honda in the green and eco-friendly car movement. Nissan could also benefit from Mitsubishi’s Asian influence, as the company is particularly active in Thailand and Indonesia.
Maryann Keller, an independent auto analyst in Stamford, Connecticut, told Bloomberg that “There is a logic to Mitsubishi Motors needing a partner, since they clearly don’t have the engineering resources to be a player in a world where technology is moving so quickly,” she said. “They’ve always been an also-ran in major markets like the U.S. But they actually have a decent business in Southeast Asia, so they have some attractive assets.”
Since Mitsubishi’s last major scandal involved deadly defects, many consumers are suspicious of the automaker.