Analysis: Nissan makes bold move with Mitsubishi stake

The top shelf of the global auto industry got a bit more crowded this week.

The three-member club of automakers which sell more than nine million vehicles a year grew to four as Renault-Nissan seized control of Mitsubishi Motors.

It’s easy to overlook Mitsubishi in America. It’s a virtual nonentity, having sold just 95,342 vehicles in 2015, but the deal fundamentally changes the world’s fourth-largest automaker, adding about one million sales a year.

Renault-Nissan sales rank behind Volkswagen Group, Toyota and General Motors.

In a move that mirrors the bold decision that created Renault-Nissan in 1999, CEO Carlos Ghosn paid about $2.2 billion for 34% of Mitsubishi. Under Japanese law, that gives Renault-Nissan control. The Renault Nissan Alliance also includes Russia’s Lada brand, Romanian Dacia and other small players.

Mitsubishi’s stock plummeted and the company’s future came into doubt recently when it was revealed it falsified fuel economy reports for vehicles sold in Japan since 1991. (No vehicles sold in the U.S. were affected.) It’s the second lurid scandal in Mitsu’s recent past, following the multiyear cover-up of a number of dangerous defects like failing brakes in the early 2000s.

Along with that checkered history, Renault-Nissan gets:

•A steady supplier of minicars, a class of tiny vehicle that’s a big deal in Japan.

•Mitsubishi’s strength in SUVs and electric vehicles.

•The legendary Lancer EVO name for high-performance AWD compact cars.

•Strong sales in several Asian countries where Nissan is weak.

•Savings from combining Mitsubishi engineering and purchasing with Renault-Nissan.

“In the profitable segments of pickups and SUV's there is significant opportunity to develop platforms which will gain from the additional economies of scale,” said Paul Newton, IHS Automotive director of world markets analysis.

Ghosn became a pop-culture hero in Japan when he led Nissan back from the brink. That legendary performance will undoubtedly help at Mitsubishi, but the two rescue operations are very different.

Nissan workers and executives were desperate when Ghosn took charge. The situation was so dire that utilities were about to shut off the lights in the company’s Tokyo high-rise headquarters.

While Renault-Nissan did rescue Mitsubishi this week, the faked fuel economy tests that laid Mitsu low came to light only because Nissan ratted the smaller company out to Japanese regulators.

Nissan engineers discovered the fraud because Nissan sells minicars Mitsubishi makes. They had little choice but to reveal the scam when they discovered it, or Nissan would've been in as much trouble as Mitsubishi.

Still, it’s hard to imagine there won’t be any hard feelings when the new management team arrives from Nissan HQ.