Nissan and Mitsubishi: Is This the Start of Something Big?

This past April, Mitsubishi Motors executives had the unenviable task of telling the world that the company had been cheating on fuel efficiency tests for 25 years.  While the company claims that the models in question were sold in Japan, not the U.S., it has had consequences on the reputation and sales of the company’s vehicles, and has caused the stock of the company to fall rather dramatically.

In the U.S., according to Autodata (motorintelligence.com), through April Mitsubishi Motors has but a 0.6 percent share of the market.  That’s the same as Jaguar-Land Rover, but you can bet that the margins are somewhat better for an F-Type and an Evoque than a Lancer and an Outlander.

That said, the U.S. market isn’t the only place in the world where Mitsubishi sells vehicles.  Last year, the company moved some 1,048,000 units on a global basis, which is not earth-shattering, but not entirely trivial.

And last week, Nissan and Mitsubishi announced that Nissan is taking a 34 percent equity stake in Mitsubishi, which gives Nissan the dominant share in the company, including the ability to nominate the chairman of the company.  This investment is on the order of 237-billion yen (or about $2.2-billion).

The two companies are far from strangers, not only in the competitive realm, but also in terms of collaboratively working together, such as the NMKV joint venture established to develop and produce kei cars, small cars and trucks that are particularly popular in Japan.

When the deal was announced, Carlos Ghosn, chief executive and president of Nissan, said: “This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors. It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies. We will be the largest shareholder of MMC, respecting their brand, their history and boosting their growth prospects. We will support MMC as they address their challenges and welcome them as the newest member of our enlarged Alliance family.”

On a more tactical plane, the two companies are going to cooperate on purchasing, vehicle platforms, technology and factory utilization.

Meaning, in effect, that Nissan is going to be gaining economies of scale, something that it is already leveraging via the Renault-Nissan Alliance, and getting additional capacity.  What’s more, Ghosn is a big proponent of electric vehicles, and Mitsubishi has been offering its electric iMEV since 2009, a vehicle that is also rebadged as the Peugeot iOn and Citroen C-Zero.  Presumably, those French models are going to transition to something more in the realm of Renault, particularly as PSA has announced that it will be developing an electric vehicle platform with Dongfeng, its Chinese partner.

As FCA’s Sergio Marchionne has pointed out in his efforts to find a partner for FCA, there is a lot of development duplication and used capacity throughout the world, something that can be addressed through partnerships and consolidations.  While to this point he’s not found that certain someone who is interested in FCA, he’s not wrong.  Not only are massive amounts of money necessary to develop things like conventional engines and transmissions, the investments needed for electrified powertrains and the sort of technologies that will give rise to automated driving capabilities are jaw-dropping.

Although Ghosn’s remarks seem to indicate that Mitsubishi will continue as Mitsubishi, the identified areas of working together is not the metaphoric hand-in-hand, but more hand-in-surgical-glove: the two will pretty much be as one.

And you know that it will redound to “advantage, Nissan.”

The larger question is whether this is going to set more activities among other companies, such as whether FCA will get the partner it is looking for.  There is the old saw that things happen in threes.  Is this the first of the series?

Don’t be surprised if that is the case.