Under Nissan Umbrella

Nissan Motor Company and Mitsubishi Motors Corporation announced on Thursday that Nissan would take 34% stake in Mitsubishi to salvage from the scandal of manipulating fuel consumption data, which was revealed last month. Mitsubishi will virtually be under control of Nissan. It is expected that this financial unification will lead to the reform of carmakers.

Mitsubishi proved to have manipulated fuel consumption data of 625,000 light cars and revealed that it had been fabricating the data with illegal car test for a quarter century. Mitsubishi is going to pay for returning tax money, which was exempted by national or local government. That penalty is supposed to fundamentally undermine its management. It was thought that Mitsubishi would not be able to rebuild its business by itself.

Although Nissan, the major client of Mitsubishi’s light cars, has been supposed to terminate the relationship with Mitsubishi, it rather decided to strengthen the cooperation. It is possible that Nissan has been so heavily relying on Mitsubishi in the production of light cars that it could not leave Mitsubishi falling down. Chief Executive Officer of Nissan, Carlos Ghosn, called the deal “a breakthrough transaction and a win-win,” according to BBC report.

Both companies will make every effort to rebuild brand image of Mitsubishi cars. Supporting technological development or enhancing human resource, Nissan tries to change business mind of Mitsubishi. If the cooperation is successful, they can get broader sales market in Southeast Asia or other regions in overseas.

The deal amounted to ¥237 billion, making Nissan the top shareholder taking over Mitsubishi Heavy Industries. Annual car products of Nissan-Renault coalition with Mitsubishi will be 9.59 millions, reaching close to General Motors ranked in the third. Competition among top carmakers including Toyota or Volkswagen will surely be hard one.

Even the frontrunner, Toyota, cannot be easy in maintaining its business. Toyota predicted that its consolidated balance sheet in March, 2017, would mark 40% decline in operating profit. Abrupt hike of the value of Japanese yen against U.S. dollar is affecting the balance of exporters like Toyota. Fuji Heavy Industry announced that it would change its brand to Subaru for future development in international market. Regardless scandal in using false data for sales, competition urges immediate reconstruction of car-making business.