Nissan Motor Co., Ltd., (Nissan), and Mitsubishi Motors Corporation, (MMC) announced May 12 that they have signed a basic agreement to form a “far-reaching strategic alliance.”
Following an MMC share issue, Nissan will take a 34 per cent equity stake in MMC for 237 billion yen.
The strategic alliance will extend an existing partnership between Nissan and MMC under which the two companies have collaborated for the past five years.
Nissan and MMC have agreed to cooperate in areas including purchasing, common vehicle platforms, technology-sharing, joint plant use and growth markets.
Carlos Ghosn, chief executive and president of Nissan, said “This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors.
“It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies.”
The agreement makes Nissan the largest shareholder of MMC.
Osamu Masuko, chairman of the board and chief executive of MMC, said “Through its long history of successful partnerships, Nissan Motor has developed a deep knowledge of maximizing the benefits from alliance partnerships.”
The transaction is expected to close by the end of the year.
The BBC noted that Mitsubishi – a relatively small player in the car industry – is at the centre of a major scandal over falsified fuel-economy ratings.
The deal will give it the financial muscle to help it weather the storm.
It will also gain access to Nissan’s technology, research and development programs that may prove invaluable in the longer term.
Nissan will gain access to Mitsubishi’s sales network across South East Asia, in areas such as Malaysia, Thailand and Indonesia – a region that is very attractive to Japanese manufacturers.
Then there’s the Nissan-Renault alliance. Adding Mitsubishi means the alliance can build about 9.5 million cars a year – putting it on par with the giants of the industry, such as Toyota and General Motors.