Roundup: Nissan to take 34 pct stake in scandal-hit Mitsubishi Motors

Nissan Motor Co. confirmed Thursday it will buy a 34 percent stake in smaller rival Mitsubishi Motors for 237 billion yen (2.17 billion U.S. dollars), with both firms saying that the tie-up would help Mitsubishi Motors to secure essential revenue and help its image following a massive fuel economy data scandal.

With Mitsubishi Motors being slammed recently by the government here for falsifying data and tests related to the fuel efficiency of some of its minivehicles possibly since 1981 and leading to diminishing public trust in the automaker, Nissan said the tie-up would help the embattled firm reestablish a firm financial base and offer both parties more growth opportunities.

"The transaction represents a potential win-win for both of our companies and promises to deliver significant synergies and growth opportunities," Nissan Chief Executive Officer Carlos Ghosn told a press briefing earlier Thursday.

"We will help this company address the challenges it faces particularly in restoring consumers' trust in fuel economy performance," Ghosn told the meeting which was shared with Mitsubishi Motors Chairman Osamu Masuko.

"The tie-up marks a critical milestone for us to regain public confidence and ensure management stability," Masuko said.

Mitsubishi Motors, since revelations of its fraudulent practice regarding presenting embellished fuel efficiency data came to light last month, has seen its domestic sales plummet, compounded by the embattled maker also admitting Wednesday that the cases affected nine more models.

Mitsubishi Motors had initially submitted evidence showing it had falsified data on the fuel efficiency of some of its own and its client's vehicles, and said that methods used to collect data pertaining to fuel economy were not in line with Japanese standards.

The Tokyo headquartered firm said that it had not complied with Japanese protocols on such data collection since 1981 and had opted, instead, to use favorable methodology for testing the efficiency of four minicars that would aggrandize the results by as much as 10 percent. The number now spans four more models, Mitsubishi Motors has said.

According to the Ministry of Land, Infrastructure, Transport and Tourism, the embellishing of data upped the fuel efficiency target for the models to 29.2 kilometers per liter from an initial 26.4 kilometers per liter.

The scandal-plagued manufacturer has purportedly been using testing standards that, while being fitting in the United States, are not in line with standards here, with the automaker's president, Tetsuro Aikawa, telling a press conference that it had "lacked the ability to correct itself."

Aikawa's remarks late last month pledging to correct such malpractice, came as it has also been revealed that some of Mitsubishi Motors' data collected for running resistance was done so without, in fact, any such tests taking place.

The government has insisted the automaker fully account for itself on its erroneous dealings over the past 25 years.

On April 21, Japanese government officials raided a plant belonging to Mitsubishi Motors Corp. in Aichi Prefecture, central Japan, after the automaker initially admitted it had falsified fuel efficiency data for more than 600,000 cars sold in Japan.

The land ministry carried out its first raid a day earlier, with Mitsubishi Motors likely to be punished, henceforth, by the ministry, for allowing its employees to knowingly manipulate data related to fuel economy on more than 600,000 minivehicles.

Of a total of 625,000 cars sold under false fuel efficiency pretenses, 468,000 were supplied to Nissan with the models affected including the ek Wagon and eK Space city cars, as well as Nissan's Dayz and Dayz Roox.

Ministry officials said they were seeking to determine exactly how the employees falsified the data, with Chief Cabinet Secretary Yoshihide Suga saying the government "will respond strictly" to the case.

The total number of affected cars will likely balloon, however, as Mitsubishi has said another nine more models may have had their data falsified.

Japan's top government spokesperson has said that Mitsubishi Motors had undermined the public's trust and raised doubts about the automaker's safety standards.

As well as being the automaker's second-largest plant in Japan, the location raided in Aichi Prefecture also doubles-up as a major research hub for the carmaker.

Mitsubishi Motors has said that it will try to atone for its fraudulent practice by paying additional fuel costs incurred by customers who bought the affected models, with industry insiders saying the case could cost the embattled firm some 50 billion yen (457.85 million U.S. dollars) in damages to customers and compensation payments to Nissan.

The government has said it is mulling slapping its own administrative sanctions on the automaker, and some other manufacturers, including carmakers, who have had dealings with Mitsubishi Motors, in addition to Nissan, are also being asked by the transport ministry to check the actual fuel economy of their vehicles as compared to documented "claims" made by Mitsubishi Motors.

Nissan, if things go ahead as stated Thursday, will become the largest shareholder in Mitsubishi Motors, overtaking Mitsubishi Heavy Industries Ltd..

Sources close to the matter said Thursday that the deal would likely favor Nissan as Mitsubishi Motors' image has been so desperately tainted and left it in dire need for external revenue to help its restructuring efforts. Industry insiders also said that question of ethics had been raised following the tie-up announcement, as Mitsubishi Motors has far from addressed or quantified its hefty compensation requirements.

Recent data has shown that Mitsubishi has seen its minivehicle sales slump 44.9 percent on year and those of Nissan drop 51.2 percent.

Mitsubishi's shares have tumbled 43 percent since its admission, while those of Nissan closed down 1.6 percent on Thursday. Endit