Mitsubishi Motors Rescued By Nissan After Fuel Data Scandal.
Is It A Takeover, Or Bailout – FT Calls It A BailOver.
Mitsubishi Motors of Japan, reeling from the impact of falsifying fuel economy data on more than 600,000 vehicles, was bailed out by compatriot Nissan which paid $2.2 billion for one third of its shares.
Or was it really a takeover? The Financial Times Lex column couldn’t make its mind up, opting instead to make up a new word; it labelled the deal a ”bailover”.
Nissan said it will buy a controlling 34 per cent stake in Mitsubishi Motors. Nissan CEO Carlos Ghosn, also chief of Renault, said the new alliance would cover purchasing, common platforms, joint manufacturing, technology development and shared cost savings.
Mitsubishi said it cheated on fuel-economy ratings for four minicars sold in Japan, and later admitted nine more models including an SUV may not have been properly tested. Two of the minicars were sold under Nissan’s brand.
Analysts said Nissan had gained control of Mitsubishi on the cheap because its shares had fallen in value by more than 40 per cent since the scandal broke.
IHS Automotive said the true cost of the scandal was still unclear, but Nissan’s stake would allow it to remain outside of the legal liability threshold.
IHS Automotive liked the possibilities offered by the deal.
“Despite the apparent opportunistic nature of the move, the investment has a wider and more long-term rationale in areas of new technology and future platform development/sharing. Mitsubishi’s plug-in hybrid technology compliments rather than competes with Renault-Nissan’s electric vehicle technology,” IHS Automotive analyst Paul Newton said.
The FT’s Lex said although Mitsubishi Motors is too small to compete globally, it is strong in South-east Asia where it generates half of its profit, compared with one-tenth of Nissan’s.
“Seen in this light, taking a stake big enough to ward off any other buyer, but not so large that it effectively owns the uncertain liabilities from the emissions scandal, is a smart first step,” Lex said.
“The obvious risk is that the scandal metastasises – as Volkswagen’s has – and $2.2 billion disappears. The oblique one is that Nissan is never able to fully integrate Mitsubishi, and it is stuck as a minority shareholder in a sub-scale carmaker with a damaged brand,” Lex said.