Nissan Motor Co. President and CEO Carlos Ghosn, left, and Mitsubishi Motors Corp. Chairman and CEO Osamu Masuko pose for photographers after their joint press conference at the Nissan headquarters in Yokohama, near Tokyo, Thursday, May 12, 2016. Photo credit AP

In the wake of a fuel economy cheating scandal that has rocked the Japanese automotive industry, Nissan will take a 34 percent controlling stake in Mitsubishi Motors, both companies announced today.


Nissan will invest 237 billion yen, about $2.2 billion, to become Mitsubishi Motors’ largest shareholder, reports Automotive News.


The publication reports Mitsubishi and Nissan will sign an agreement on May 25 where Nissan can name four directors to Mitsubishi Motors’ board.

Reuters reports that the two companies will now share and jointly develop technology, and collaborate on purchasing and plant utilization.

In other words. it does not look likely at present that the Mitsubishi brand will simply cease to exist or be completely enveloped by Nissan. Here’s what Nissan CEO Carlos Ghosn said:

Ghosn said the alliance would cover purchasing, common platforms, joint manufacturing, technology development and target shared cost savings. Nissan would also contribute corporate governance and management expertise to help Mitsubishi restore public trust in its brand. “It represents a win-win,” Ghosn said. “We believe in the potential of Mitsubishi Motors.” [...] “We are not going to change Mitsubishi. Mitsubishi is going to change by itself,” Ghosn said. “We are going to support Mitsubishi to do that.”


The deal comes mere weeks after Mitsubishi Motors—the carmaking division of Japanese manufacturing giant Mitsubishi Heavy Industries—conceded that it had been cheating on fuel economy tests for years by altering tire pressures on its microcars. And it was Nissan, its partner in that microcar venture, that caught Mitsubishi in the act. Fuel economy was overstated by as much as 10 percent on some models.



This week Mitsubishi announced that it may have been cheating fuel economy tests with all of its Japanese-market cars, widening a scandal likely to have huge financial and legal ramifications—but one that is so far only limited to the Japanese market.


Since then, sales of the crucial microcars have plummeted, as have Mitsubishi’s stock prices.

So what does Nissan have to gain by taking control of this beleaguered company? More than you might think. Despite Mitsubishi’s well-documented struggles in the North American market, it’s a hugely successful automaker in other places, namely Southeast Asia, where as Automotive News concedes Nissan has failed to gain much traction. Mitsubishi could also help Nissan hit new sales volumes.


There’s also the lucrative microcar partnership between the two companies in Japan, and the fact that both companies can pool resources on electrification.

And Mitsubishi Motors, of course, gets a badly-needed infusion of cash from a much larger automaker.


More to come on this developing story.