TOKYO -- Nissan Motor plans to spend roughly 200 billion yen ($1.84 billion) to buy an over 30% interest in Mitsubishi Motors, hoping to help the embattled carmaker turn itself around in the wake of a fuel-economy scandal.
The Japanese automakers, currently in the final stages of negotiations, are expected to hold board meetings Thursday to decide on the capital tie-up. Mitsubishi Motors is likely to issue new shares to Nissan through a private placement. If the deal goes through, Nissan would become the top shareholder, surpassing Mitsubishi Heavy Industries, which has a roughly 20% stake.
The duo operates a 50-50 joint venture that designs minicars, which are then manufactured by Mitsubishi Motors and supplied to Nissan. Mitsubishi Motors has said that Nissan had no hand in doctoring fuel-efficiency test data for the four models implicated. Minicars account for 60% of Mitsubishi Motors' domestic sales volume.
Mitsubishi Motors is financially sound for now, with an equity ratio of 48% and 450 billion yen in cash and equivalents as of the end of March. But a string of scandals since the 2000s has eroded consumer trust in the automaker. The impact on sales will undoubtedly extend beyond minicars.
At the same time, Mitsubishi retains considerable brand power overseas. Its sport utility vehicles are popular in Thailand and Indonesia, with Asia generating more than 50% of the company's group operating profit. To Nissan, whose share in Asia pales in comparison to that of Toyota Motor and Honda Motor, the Mitsubishi brand is appealing.
The carmakers plan to cooperate in electric vehicles as well. By honing electric-car technologies, they hope to counter Toyota and Honda, which are focusing on fuel cell vehicles.
Nissan tapped Mitsubishi as a partner against the backdrop of minicars' growing presence in the Japanese market. Minicars, supplied by Mitsubishi Motors, make up nearly 30% of Nissan's sales volume in Japan. Despite the fuel-economy fraud, Nissan, which lacks minicar manufacturing facilities of its own, has said it hopes to continue the partnership.