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Mitsubishi Corp. to raise Mitsubishi Motors stake to 20%

Trading house and group carmaker seek stronger ties in Asian auto sales

Mitsubishi Motors worked with Mitsubishi Corp. to set up an Indonesian auto plant that began operating last year.   © Not selection

TOKYO -- Trading house Mitsubishi Corp. plans to roughly double its interest in Mitsubishi Motors to around 20%, hoping to strengthen cooperation in such areas as auto sales in Asia outside Japan.

Mitsubishi Corp. held a 9.23% interest in Mitsubishi Motors as of the end of last September. It will spend some 120 billion yen ($1.12 billion) to buy additional shares through a tender offer. An official announcement is expected as early as Tuesday.

Fellow group members Mitsubishi Heavy Industries and Bank of Tokyo-Mitsubishi UFJ -- which own about 8% and 3% of the automaker, respectively -- are expected to participate in the tender offer. Nissan Motor is the largest shareholder of Mitsubishi Motors, with a 34% stake.

Mitsubishi Corp. plans to work with Nissan to help Mitsubishi Motors continue recovering from a domestic sales slump and expand sales in emerging markets.

Mitsubishi Corp. imports and sells Mitsubishi Motors vehicles in such markets as Russia, the U.K. and Malaysia. They work together especially closely in Indonesia, where they participate in joint-venture operations handling auto production and assembly as well as sales. The trading house has helped the automaker maintain its high market share there, including through supporting the construction of a factory for multipurpose vehicles and sport utility vehicles that went online in 2017.

Mitsubishi Corp.'s medium-term business plan positions autos as a key profit driver alongside such areas as liquefied natural gas and food raw materials. The company takes a hand in the management of investee companies in an effort to promote growth. Mitsubishi Motors is no exception, with the trading house looking to send more than 30 staffers there. CEO Osamu Masuko also started off at Mitsubishi Corp. before moving to Mitsubishi Motors.

But with less than a 10% stake, the trading house gets no direct financial benefit from the relationship except dividend payments. Making Mitsubishi Motors an equity-method affiliate would let Mitsubishi Corp. book a portion of the carmaker's profits as its own.

The partnership extends beyond the auto industry. The pair has teamed up to test an energy management system in Europe that uses electric-car batteries.

Mitsubishi Motors sold preferred shares to Mitsubishi Corp., Mitsubishi Heavy and the then-Bank of Tokyo-Mitsubishi in the 2000s to help it weather a crisis brought on by revelations that it had systematically covered up defects. Following a 2016 scandal involving faked fuel economy numbers, Mitsubishi Motors formed a capital and business partnership with Nissan. Nissan and the Mitsubishi group agreed to maintain a combined interest of at least 51%.

Mitsubishi Motors worked with Nissan before the capital tie-up, including on minicar development. The partnership has since expanded to include cost controls, joint transportation of finished vehicles, and auto financing in certain areas.

Mitsubishi Motors' domestic sales have been on the mend of late, with minivans in particular a bright spot. In the key market of Southeast Asia, it has enjoyed growing sales of SUVs and pickup trucks along with brisk orders for new MPVs. The automaker expects to swing to a group net profit of 100 billion yen for the fiscal year ending March 31 from the 198.5 billion yen loss of fiscal 2016.

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