In a rather unlikely turn of events, Nissan has taken a controlling stake in Mitsubishi motors with aims to “rebuild trust” in the company after they faced a rather embarrassing scandal after admitting that they had provided falsified information to overemphasize the fuel efficiency of more than 600,000 cars.
According to the report, Mitsubishi fabricated mileage test results on a number of models, including two manufactured for Nissan, who happens to be Japan’s second largest car-maker after Toyota (if you didn’t already know that).
At the time the cars affected were only sold in Japan. Nonetheless, the investigation would be extended to overseas markets as well just to be safe.
The Future Of Nissan (And Mitsubishi)
As such, Nissan will take a one-third stake in the car-maker in order to boost Mitsubishi. Accordingly, Nissan will pay $2.1 Billion for a 34% share, thus giving it a controlling stake in their Japanese rival.
Since the unfortunate event, Mitsubishi’s share price has plummeted about 40% as stock traders unsure about both the financial and reputational damage rushed to dump the stock.
According to Nissan’s Chief Executive Carlos Ghosn, the company would work diligently to restore Mitsubishi’s reputation. Furthermore, he added that they are determined to preserve and cherish the Mitsubishi Motors brand. And that they would help this company overcome the challenges faced, especially with regard to restoring consumer trust in its fuel economy performance.
Despite the two companies already being partners in development and manufacturing, there was no cross-ownership involved.
According to Jasper Lawler, an analyst at CMC Markets, Nissan is taking somewhat of a major risk by having a stake in Mitsubishi Motors as there is no clear cut figure on how much the fuel economy scandal will cost in fines, litigation and lost business.
With Mitsubishi’s share prices down 40%, Nissan has all the bargaining power needed to negotiate a bargain price. Under the terms of the deal, Mitsubishi will issue new shares to Nissan, at a 5.3% discount, amounting to $2.1Billion.
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