Nissan and Mitsubishi: Shotgun Wedding of the Year?
Some scandals linger on for way too long. From the looks of it, we’ll be stuck sniffing the fumes from Volkswagen’s Dieselgate” scandal well into the next decade. And if Takata is just experiencing its “Titanic hitting iceberg moment” now, then what have we been dealing with for the past year?
Luckily, it looks like we’ve narrowly avoided another soap opera, though this one had much more Machiavellian overtones than anything we’ve seen in some time. Last month, Nissan announced that it discovered at least 470,000 cars built under license through its partnership with Mitsubishi had falsified fuel economy ratings. The company alleged that Mitsubishi may have been misrepresenting gas mileage on its Kei cars sold in Japan by altering tire pressure on its test cars. Then it came out that it may have been doing it since 1991. Then it came out that every model the sixth-largest Japanese automaker currently sells in its home country may be affected.
As the scandal has widened, sales and stock prices have plummeted, leaving the already shaky Mitsubishi in even worse shape. So in the wake of CEO Osamu Masuko and COO Tetsuro Aikawa tendering their resignations, none other than Nissan has swept in and bought a controlling stake in its smaller partner, seizing control, and seemingly starting a new chapter for Mitsubishi Motors. Hey, what’re friends for?
The deal was recently hammered out between the companies, and a formal deal will be signed on May 25. Nissan will spend roughly $2.2 billion to get a 34% stake in the company, the ability to name four directors to Mitsubishi’s board, and will jointly develop products and technology. According to Automotive News, Nissan CEO Carlos Ghosn said the move would help “cover purchasing, common platforms, joint manufacturing, technology development and target shared cost savings. Nissan would also contribute corporate governance and management expertise to help Mitsubishi restore public trust in its brand.”
While this may look like another case of a corporate big fish eating the little fish, there’s more to this union than meets the eye. Ignore the look of utter defeat (or maybe it’s relief?) in outgoing CEO Osamu Masuko’s eyes (above, right). Mitsubishi actually has a lot to benefit from this deal. With the notable closure of the company’s Normal, Illinois plant last year, the company has been consolidating and downsizing its production facilities. With Nissan’s deep pockets and vast resources, the company is likely to become a lot more versatile without any major investment on its part. Plus, that $2.2 billion cash infusion will likely go far in making this mess go away a lot quicker than if the company tried to weather it on its own.
And while it may seem strange to us Americans, Mitsubishi and its lineup could prove to be a huge asset to Nissan. The company relaunched the Datsun brand in 2013 to sell small cars in Southeast Asia, and so far, it hasn’t had much luck gaining traction. Mitsubishi, however, is incredibly popular in this part of the world, so a healthy Mitsubishi is a very good thing for Nissan. The company has reasons why it’s keeping Mitsubishi Motors alive, and we’re willing to bet Southeast Asia is probably one of the big ones.
And so Mitsubishi begins a new chapter under the control of Nissan. But is that really a bad thing? Before this scandal broke, we auto scribes were waiting for the impending death of the company’s American division. With a little cash, better resources, and guidance from a larger, more successful company, there’s a chance that things could get interesting at Mitsubishi again. And as history has shown us, that’s never a bad thing.