Nissan has signed a memorandum of understanding with Mitsubishi Motors to acquire 34 percent stake in the troubled company. There is a lot to happen yet but as part of the agreement, Nissan is buying 506.6 million shares in Mitsubishi Motors Corporation for 468.52 yen ($4.3) per share for a total of 237B yen ($2.17 billion). This will make Nissan the biggest shareholder of MMC and now the biggest question on everybody's mind is if brand 'Mitsubishi' will survive especially since the scandal hit the scenes.
"Yes" was the prompt answer by Chairman and CEO Nissan, Carlos Ghosn. "The Mitsubishi brand will continue and we will only help reinforce the competitiveness of the brand by exchanging practices.' This 'exchange' will also include sharing platforms which will benefit both the manufacturers. 'It would be a win-win situation for both Nissan and Mitsubishi", he said.
As part of the plan, there will be no merging of operations and there will be no plants which will shut down, however, there will be a possibility of cross manufacturing cars in the respective company's manufacturing plants. So, a car from Mitsubishi might be manufactured in a Nissan plant and vice versa. Ghosn made it very clear that there will be no common marketing or sales team for both manufacturers. In fact, the showrooms too will be different, however, the same dealer, could run both operations through different dealerships.
While there is a lot to be decided yet on this front, the cost savings for Nissan are humongous. We'll give a small example how. Platform sharing will help them build new cars and enter new segments. While it takes about $500 million to develop an all-new platform, sharing, though will incur costs, will turn out to be far lesser. Both manufacturers have attained their proficiency in building SUVs and small cars, Mitsubishi holds a stronghold in South East Asia, where its local production is the highest. Nissan on the other hand, has a attained good product development in the European nations and it's seen a fair amount of success even in the US, so with this new acquisition, we'll see both the companies entering new segments thanks to platform sharing.
Though the platforms will be shared, do not expect badge re-engineering as Ghosn stated, "The brand DNA will be maintained and though the technology development will be common, we will see that the products will be completely different."
Nissan will certainly benefit from the plug-in hybrid technology and both Nissan and Mitsubishi are working on future electric cars. The product design too will remain separate entities which will spawn different looking products altogether. Talking about the sales forecast in 2016, Ghosn said that the company is looking to sell more than 10 million cars worldwide and we might see the company in the top 3 car makers in the world.
Now, we've already told you about Toyota increasing its share in Daihatsu and we'll see a whole new generation of cars come to India thanks to this alliance and we could certainly see more cars coming into India from the Nissan stable, which will make things a bit more interesting. Though Nissan had made its entry way before Renault in India, it hasn't really tasted success in the way Renault has and the badge re-engineering hasn't helped either. Brand new cars and a brand new approach will help Nissan get back on track to woo Indian customers and this deal with Mitsubishi might help pave the path for that.
