Nissan has announced it will acquire a 34% stake in rival Mitsubishi Motors, in the wake of the latter’s recent scandal over fuel efficiency.
According to the Japanese auto giant, the all-share deal is valued at 237 billion yen ($2.2 billion).
Nissan CEO Carlos Ghosn has called the deal “a breakthrough transaction and a win-win” for both companies.
The tie-up is subject to regulatory approval as well as the backing of Mitsubishi shareholders.
If it is approved, the deal is expected to close by the end of 2016 and make Nissan the largest shareholder in Mitsubishi Motors.
The strategic alliance will extend an existing partnership between Nissan and Mitsubishi Motors forged over the past five years.
Both will co-operate in areas including purchasing, technology and sharing platforms.
Carlos Ghosn said: “We will support Mitsubishi Motors as they address their challenges and welcome them as the newest member of our enlarged alliance family.”
Nissan’s Alliance family is built around a 17-year cross shareholding agreement with French auto maker Renault. Nissan has also previously acquired stakes or signed partnerships with other carmakers including Daimler.
Mitsubishi Motors CEO Osamu Masuko 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.”
The tie-up was announced as Nissan reported a 14.5% rise in net profit to 523.8 billion yen ($4.4 billion) for the 12 months to March.
Nissan said rising demand in North America and China helped to offset unfavorable currency movements and weakness in emerging markets.
For the financial year to March 2017, Nissan is estimating flat profit growth and an 11% fall in operating profit due to the strengthening yen.
Carlos Ghosn said: “Encouraging demand for new models, combined with continued cost efficiency, helped us withstand currency headwinds and volatile trading conditions in several emerging markets.”
Nissan’s recently launched models including the Maxima, Altima and Titan pick-up trucks were expected to contribute to global sales growth in the coming year.
Mitsubishi Motors shares have risen on media reports the auto maker will compensate customers after it admitted falsifying fuel efficiency data.
Shares in the Japanese auto maker have lost some 50% of their value since the scandal. On May 10 shares rose 1.9%.
The Nikkei 225 benchmark index closed 2.2% higher at 16,565.19 points.
Meanwhile, Takata shares shed 7.4% on reports of an additional seven million recalls of its faulty airbags.
On May 9, Takata had also said it was expecting a loss instead of a profit for the fiscal year until March due to the soaring costs of their global airbag recall.
In China, markets were reacting to fresh inflation data showing April’s price increases steady from the previous year.
China’s consumer price index (CPI) was up by 2.3% on the same month the previous year.
The Shanghai Composite index was flat at 2,832.59 points at the close of Tuesday’s session. Meanwhile Hong Kong’s Hang Seng closed higher by 0.4% at 20,242.68.
Australia’s ASX/200 finished trading 0.4% higher at 5,342.80, despite the country’s commodity giants suffering from lower iron ore prices.
Mitsubishi Motors’ domestic orders for its vehicles have halved since the Japanese automaker revealed last week that it had been falsifying fuel efficiency tests.
Company president Tetsuro Aikawa said the situation was “very serious” but said he had no plans to resign immediately.
Tetsuro Aikawa said he did not know if sales abroad had been affected yet.
Mitsubishi shares have more than halved since the scandal broke.
Investors are worried that Mitsubishi Motors – Japan’s sixth-largest automaker – will face fines and compensation claims.
Last week, Mitsubishi admitted that it had falsified fuel economy data for four “minicar” models sold only in Japan.
The inaccurate mileage tests involved 157,000 of its eK wagon and eK Space, and 468,000 Dayz and Dayz Roox vehicles produced for Nissan. All were sold in Japan only.
On April 26, Mitsubishi admitted to manipulating test data for the past 25 years, far longer than initially thought.
The company’s board has formed a panel to investigate the case, and US regulators have also launched an investigation into whether car models complied with their fuel economy rules.
At a news conference on April 27, Mitsubishi Motors said that because of uncertainty about the potential damage to its brand it could not make forecasts for the financial year 2016-2017.
However, Tetsuro Aikawa was able to announce better-than-expected results for the year ending in March 2016.
Mitsubishi Motors reported that its operating profit rose 1.8% to 138.4 billion yen ($1.2 billion) while revenue increased by 4% to 2.27 trillion yen.
Japanese automaker Mitsubishi Motors has admitted to rigging some fuel consumption tests since 1991.
The admission follows last week’s revelation that Mitsubishi had falsified fuel economy data for more than 600,000 vehicles sold in Japan.
Mitsubishi Motors VP Ryugo Nakao said at a press conference in Tokyo on April 26: “For the domestic market, we have been using that method since 1991.”
The number of models affected was not yet known, Ryugo Nakao added.
The company’s president, Tetsuro Aikawa, said an inquiry was continuing, suggesting that more irregularities could be found.
Photo Getty Images
“We don’t know the whole picture and we are in the process of trying to determine that. I feel a great responsibility,” he said.
Mitsubishi hares fell a further 10% in Tokyo on April 26, bringing the slide since the scandal erupted to almost 50%.
Tetsuro Aikawa said he did not know why employees resorted to falsifying fuel economy tests to make mileage figures seem better.
The automaker had repeatedly promised to come clean after a huge scandal 15 years ago that involved a systematic cover-up of vehicle defects.
The inaccurate mileage tests revealed last week involved 157,000 of its eK wagon and eK Space, and 468,000 Dayz and Dayz Roox vehicles produced for Nissan. All were sold in Japan only.
The main attraction of the “minicars”, which have tiny 600cc engines – not much bigger than a large motorcycle – is their frugal fuel consumption and their tax breaks.
Mileage fraud breaks Japan’s fuel efficiency laws and possible penalties were unclear due to the uncertainties about the outcome of an investigation, the transport ministry said.
Mitsubishi has set up a panel of three external lawyers report on the scandal within three months.
Production and sales of all the models in question have been halted.
Japanese automaker Mitsubishi Motors has admitted falsifying fuel economy data for more than 600,000 vehicles sold in Japan.
The company has admitted that tire pressure figures were falsified by employees to flatter mileage rates.
Almost 470,000 vehicles that Mitsubishi made for Nissan were affected and the issue was uncovered after Nissan found inconsistencies.
The announcement sent shares in Mitsubishi down more than 15% in Tokyo.
Mitsubishi bosses, including the company’s president Tetsuro Aikawa, bowed deeply at the start of a press conference on April 20 in Tokyo.
“The wrongdoing was intentional. It is clear the falsification was done to make the mileage look better. But why they would resort to fraud to do this is still unclear,” Tetsuro Aikawa said.
Photo Getty Images
Although he was unaware of the irregularities, the company’s president said: “I feel responsible.”
The inaccurate tests involved 157,000 of Mitsubishi’s own cars and 468,000 vehicles produced for Nissan.
The issue affected models including Mitsubishi’s ek Wagon and eK Space, as well as Nissan’s Dayz and Dayz Roox.
All are “mini-cars” with 660cc petrol engines and are popular in Japan but have found little success in other markets.
Mitsubishi Motors is Japan’s sixth-largest car maker and sold more than one million vehicles in 2015.
The issue was reported to Japan’s transportation ministry and Nissan told dealers to stop selling the affected vehicles. It was considering ways to help owners of the affected cars.
Shares in Mitsubishi Motors closed down 131 yen at 733 yen in Tokyo – their biggest one-day fall in nearly 12 years.
This is the first time that a Japanese automaker has reported misconduct involving fuel economy tests.
Japanese automaker Mitsubishi Motors shares have fallen more than 15% after it said an unspecified number of its cars had failed fuel tests.
Mitsubishi will hold a news conference in Tokyo at 5pm local time about the issue.
The company’s president, Tetsuro Aikawa, will attend the briefing.
Mitsubishi shares closed down 131 yen at 733 yen in Tokyo – their biggest one-day fall in nearly 12 years.
NHK said the faulty tests could affect about 600,000 Mitsubishi-produced cars, including some vehicles it makes for rival Nissan.
Mitsubishi sold more than one million vehicles in 2015.
“One of our models was found to have failed part of a fuel economy test,” a company spokesman said.
In 2014 South Korean auto makers Hyundai and its affiliate, Kia, agreed to pay $350 million in US penalties for overstating their vehicles’ fuel economy ratings. They also resolved claims from car owners.
The Mitsubishi revelation follows last year’s emissions scandal at Volkswagen in which the German automaker was found to have installed devices in some models that fooled tests.
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