Mitsubishi is now officially part of the Renault-Nissan alliance

Article by Christian A., on October 24, 2016

Mitsubishi is now officially part of the Renault-Nissan alliance after Nissan took over the Japanese car company recently. We know a lot has been happening in the car industry, but there’s nothing more momentous than this. At least for the whole 2016. From what we can recall, the last time we heard something like this has occurred, was in 2014. That was after Chrysler was bought out by Fiat Automobiles. But that’s a different story.

Mitsubishi, as we know, has had a very difficult year following reports of the cheating scandal. Oh wait, you haven’t heard about that yet? Well, Mitsubishi got itself screwed up after it was revealed that most of its vehicles (marketed for Japan) cheated on emissions test ratings. Sadly, they had been lying about their cars’ fuel efficiency, and that went on for twenty-five long years.

Now it seems as if Nissan felt really bad for Mitsubishi, but that may not be the case. It has been five months since the buy off was initiated and only became official recently. Technically speaking, Nissan now owns thirty four percent of Mitsubishi. That only means that Nissan also gets the upper hand over Mitsubishi Motors. You’d think 34% is too little, but according to Japanese corporate law, that percentage is enough to make things go their way. Besides, it costs 237 billion Yen (or equivalent to $184 billion).

Nevertheless, we see a win-win situation here. Mitsubishi could be an important asset to the Renault-Nissan Alliance, considering Mitsubishi’s yearly 10M vehicles sales volume. Given that, those figures could also mean additional sales for Nissan. At this time, the Renault-Nissan ranks number 3 when it comes to the biggest car manufacturers worldwide, taking over the place of General Motors. Toyota and Volkswagen are still leading the race but that could change any day.

Aside from this, the tie up could also mean sharing the same facilities and innovations. Nissan and Renault have shared human resources, purchasing, logistics, manufacturing and engineering facilities since 2014. The alliance is looking to save as much as 5.5 billion euros due to this and will probably get all settled by 2018. Also, about 70% of their cars are expected to be using the same platforms by year 2020.

Mitsubishi has already developed some exceptional plug-in hybrid technologies that for sure would be an advantage. In other words, Nissan doesn’t need to go back to square one when designing Infiniti’s PHEV device (just in case they want to consider this, right)? Until then, it’s going to be interesting to see how things would go from here.

Press Release

MITSUBISHI MOTORS JOINS RENAULT-NISSAN ALLIANCE

Mitsubishi Motors Corporation (MMC) announces that Nissan Motor Co., Ltd. (Nissan) has become its largest shareholder after completing the purchase of 34% of MMC-issued stock for 237 billion JPY.

As part of Nissan's strategic investment, MMC will become a full member of the 17-year strong global alliance between Nissan and Renault – paving the way for synergies to enhance profit margins and earnings per share.

Nissan Chairman and Chief Executive Officer Carlos Ghosn has been nominated to become chairman of the Board. Ghosn will be joined by three other Nissan nominated directors, including Mitsuhiko Yamashita, Nissan's former executive vice president of research and development, who joined MMC earlier this year as head of development. The other nominees are Hitoshi Kawaguchi, Nissan chief sustainability officer and head of global external affairs, and Hiroshi Karube, Nissan global controller and global asset manager.

MMC President and Chief Executive Officer Osamu Masuko requested that Nissan also provide a senior executive to join the company's executive committee to bolster MMC's management. Trevor Mann, currently Chief Performance Officer of Nissan, will become Chief Operating Officer of MMC.

"I welcome Nissan's willingness to provide strategic, operational and management support as our new lead shareholder," said Masuko. "As part of our Board and management team, Nissan will help us to rebuild customer trust in our company and maximise potential future synergies through our deeper alliance."

MMC will appoint a new role of director for global risk control to report directly to the chief executive officer, who will oversee compliance and risk control. This director will regularly report to the board on moves to enhance governance at MMC.

The three largest institutional shareholders in MMC – Mitsubishi Heavy Industries, Mitsubishi Corporation and The Bank of Tokyo-Mitsubishi UFJ – have welcomed Nissan's investment and pledged their support for its board nominees. Moving forward, these three Mitsubishi institutional shareholders together with Nissan will maintain a more than 51 percent of the share capital.

Nissan and MMC will begin cooperating on a wide-ranging synergy program, building on a five-year alliance in minicars between the two companies.

The two companies have identified a number of valuable synergies in areas including:

Joint purchasing cost-reduction
Deeper localisation in operations around the world
Joint plant utilisation
Common vehicle platforms
Technology sharing
Cooperation in emerging and developed markets; and
The use of the Nissan Sales Finance Company to serve MMC customers in any market where mutually beneficial.
The partnership is expected to generate significant recurring synergies for MMC, equivalent to a 1 percentage point increase in operating profit margin in fiscal year 2017, 2 percentage points in fiscal year 2018, and more than 2 percentage points in fiscal year 2019. The projected synergies are also forecasted to enhance MMC earnings per share in fiscal year 2017 by 12 yen per share, and by 20 yen per share in fiscal year 2018.

Ghosn said: "The expanded Alliance will be one of the largest automotive groups in the world, with annual sales of 10 million units in fiscal year 2016. The addition of Mitsubishi Motors will build on the entrepreneurial spirit and management cooperation that has characterised our alliance with Renault for 17 years. I am confident this will benefit all stakeholders."

 

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