Nissan Takes Over Mitsubishi Motors Following Fuel Economy Scandal

In the wake of a fuel economy scandal that saw Mitsubishi admit to fudging the numbers on most all of their Japanese models, Nissan announced that it has purchased a 34 percent controlling stake in the embattled automaker. Nissan invested 237 billion yen ($2.2 billion) to complete the purchase and is now Mitsubishi's largest shareholder.

A few months ago, Mitsubishi announced that it had falsified fuel economy figures on it's Japanese microcars by lowering their tire pressures prior to testing. Ironically, many of these microcars, or  "kei cars" as they're called in Japan, were purchased and rebadged by Nissan. Nissan caught Mitsubishi red-handed; overstating the fuel economy numbers by as much as 10 percent on some models. Sales of these microcars have sharply declined since this news, as has Mitsubishi's stock.

Nissan CEO Carlos Ghosn said that this partnership "covers purchasing, common platforms, joint manufacturing, technology development, and target-sharing cost savings." He also said that Nissan will contribute corporate governance and management expertise to help restore the public's faith in Mitsubishi. 

Ghosn later was asked what would happen to the Mitsubishi brand. "We are not going to change Mitsubishi. Mitsubishi is going to change by itself," he said. "We are going to support Mitsubishi to do that."

Both automakers stand to gain something from this partnership. Mitsubishi will get a much needed shot of capital from a larger automaker, as well as some potential help breaking into the U.S. market where Mitsubishi has struggled to sell cars. Mitsubishi has been a stand-alone company in the U.S. since their Diamond-Star Motors partnership with Chrysler ended in the mid-1990's. This deal helped Mitsubishi first gain traction in America by rebadging some of their platforms as Chrysler, Dodge, and Plymouth models.

On the opposite side of the coin, Nissan has thrived in the United States, while they have struggled to sell many cars in Southeast Asia. Mitsubishi has been a kingpin in that market for some time and could help Nissan to sell more cars in areas like their native Japan.

Both companies are also expected to continue their lucrative microcar agreement in Japan, as well as partner on newer projects like electric vehicles. 

NAFA Fleet Management Association
http://www.nafa.org/