Nissan Motor buys controlling stake in embattled Mitsubishi Motors for $2.2 bn

Nissan Motor Co yesterday struck a deal to buy a 34 per cent stake in its smaller, scandal-hit rival Mitsubishi Motors Corp for $2.2 billion.

The deal will give Nissan four board seats on Mitsubishi Motors.

The lifeline thrown by Nissan comes on the same day that Mitsubishi revealed that its cheating on gas mileage ratings extends to more models than previously revealed.

A 34-per cent stake would make Nissan the single largest shareholder in Mitsubishi Motors giving it de facto control of the Minato, Tokyo-based company.

Other current large shareholders in Mitsubishi Motors are Mitsubishi Heavy Industries Ltd with about a 20 per cent stake, followed by Mitsubishi Corp with 10 per cent, Bank of Tokyo-Mitsubishi UFJ with 4 per cent.

These shareholders hold a combined 34-per cent stake in the automaker, which will be diluted to around 22 per cent after closing of the Nissan deal.

Carlos Ghosn, CEO of Nissan, has called the deal "a breakthrough transaction and a win-win" for both companies.

"We will support Mitsubishi Motors as they address their challenges and welcome them as the newest member of our enlarged alliance family," Ghosn added.

Nissan and Mitsubishi already are in partnership for developing and producing several minicars with 0.66 liter engine displacements for the Japanese market, but these sales have stopped since late April after Mitsubishi acknowledged that it had overstated the fuel economy for these cars.

Mitsubishi last month admitted that it overstated the fuel economy of four of its mini-vehicle models for the Japanese market - the Dayz and Dayz Roox which are marketed under Nissan's brand name, and two other models under the Mitsubishi brand.

On Wednesday, Mitsubishi Motors extended its cheating on fuel mileage ratings to nine models sold in Japan and others that are no longer sold, encompassing virtually all the models it sold in its home country.

"Internal hearings suggest that running resistance was improperly calculated in nine other models currently sold in Japan, as well as in other models no longer sold in Japan," Mitsubishi said in a statement.

During the development of the fuel-economy grade, the fuel consumption target was raised a total of five times, from 26.4km/L to 29.2km/L. The hiking of fuel consumption target was because of Mitsubishi's deep concern regarding new competitor fuel consumption levels.

Analysts opine that Mitsubishi will face up to $1 billion in compensation payments to its customers and its partner Nissan.

Osamu Masuko, CEO of Mitsubishi Motors, said he hoped the deal with Nissan would restore confidence in the company: "It is not an easy task to regain trust, so through the alliance with Nissan, we will be starting a path towards tackling this difficult task."

Ghosn said that both companies would now share and jointly develop technology, and could realize "billions" in synergies by coordinating purchasing, plant utilization and cooperating in growth markets.

"We are determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly in restoring consumer trust in its fuel economy performance," Ghosn said.