Nissan Mitsubishi

Nissan and Mitsubishi have confirmed that discussions are underway for the former purchase a roughly one-third stake in latter, as Mitsubishi continues to struggle in the wake of a deepening fuel economy cheating scandal, according to Reuters.

“Nissan and Mitsubishi are discussing various matters including capital cooperation, but nothing has been decided,” said statements issued by the Japanese carmakers, adding that any developments will be announced once the boards of both companies meet separately later today to discuss the issue.

The news agency quoted two people familiar with the matter as saying that the companies were in “advanced negotiations” over a deal that would see Nissan spending around 200 billion yen (RM7.4 billion) for the aforementioned stake.

If the deal does goes through, Japan’s second largest carmaker would become the largest single shareholder in the much smaller Mitsubishi, and would give it a bigger stake than the 15% it owns of Renault, its alliance partner. By contrast, the latter has a 43.4% stake in Nissan.

mitsubishi-ek-wagon

The news of confirmed discussions between the two carmakers comes just a day after Mitsubishi said that it had enough capital in reserve to handle the fallout of the scandal, even as it warned that it may have doctored the fuel economy figures of more vehicles than just the kei cars it originally announced.

Last month, the company admitted that it had used had been using methods not compliant with Japanese standards to test for fuel economy since 2002. The cars that brought the issues to the forefront were the Mitsubishi eK Wagon and eK Space as well as the Nissan Dayz and Dayz Roox, which the automaker has been manufacturing and supplying to Nissan (the party that actually uncovered the fuel economy discrepancies when working on development for the next generation of the minicars) since June 2013.

It is estimated that Mitsubishi will have to fork out up to US$1 billion (RM4 billion) to compensate buyers for “eco-car” taxes and additional fuel costs, as well as to pay Nissan for the discrepancies. Production of all four models have been halted since late last month.

The company has lost around 42% or US$3 billion (RM12 billion) of its market value since the revelation of the scandal on April 20, due to fears of potentially massive compensation costs. Sales of its kei cars were halved in April.

Building kei cars for Nissan has helped drive sales of Mitsubishi’s Japanese sales, particularly as models of its own brand have lost market share. Mitsubishi sells about a third of its worldwide production of cars in Japan, while its presence in the rest of Asia is growing.

It’s not the first time MMC has had to deal with a scandal. About a decade ago, the automaker almost came to the brink of collapse following a defects scandal, in which it emerged it had been systematically covering up problems and issues over decades. The latest implosion will likely hit the company hard, as fuel economy has been a selling point for the automaker.