Nissan Motor Co has agreed to buy a 34 percent stake in Mitsubishi Motors Corp, taking de facto control with a $2.2 billion bet that bails out its smaller, scandal-hit rival. The deal is a lifeline for Mitsubishi Motors, which is mired in its third scandal in two decades and has had $3 billion wiped off its market value after confessing to manipulating fuel economy data. But it should also be a boost for Nissan. Japan's second-largest car maker has struggled to make inroads into Southeast Asia, in countries like Thailand and the Philippines, where Mitsubishi's models are popular. Mitsubishi and Nissan already cooperate on development and manufacturing with a partnership dating back to 2011, but that deal does not currently involve any cross-shareholding. Under Thursday's deal, Mitsubishi Motors will issue new shares to Nissan at a 5.3 percent discount to Wednesday's close, raising 237.4 billion yen ($2.18 billion). That will hand Nissan just over a third of the group - enough to wield control, under Japanese shareholding rules. Nissan Chief Executive Carlos Ghosn said the two would now share and jointly develop technology, and could realize "billions" in synergies by coordinating purchasing, plant utilization and cooperating in growth markets. "We are determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly in restoring consumer trust in its fuel economy performance," Ghosn said, addressing a joint press conference in Yokohama, south of Tokyo. Nissan will be able to nominate a third of Mitsubishi Motors' board, which Ghosn said he believed would be led by a Nissan executive - prompting industry analysts and bankers to forecast a significant reshuffle at the top. Mitsubishi Motors admitted last month it overstated the fuel economy of at least four of its models - mini cars sold in Japan, including two sold under Nissan's badge. That has badly hit the group, bruising a brand already losing market share and dragging its shares down over 40 percent as investors fretted over potential compensation costs. Ghosn said he had been "reassured" by Mitsubishi Motors' Chief Executive Osamu Masuko over the size and scope of the fuel economy troubles, which Masuko said had accelerated discussions. Mitsubishi Motors shares were untraded before closing up 16 percent at the daily limit. Nissan shares closed down 1.4 percent.
TOUGHER TASK Ghosn said improving performance in kei cars, a Japanese category of small cars, was one key reason for the deal. Indeed, Nissan will gain a leg up in Japan's small car market, where it is dwarfed by Suzuki and Toyota's Daihatsu.