Renault takes Mitsubishi

Renault-Nissan CEO Carlos Ghosn has just made himself the king of electrified cars.

Ghosn’s alliance was already the world’s biggest seller of battery-electric cars and with Nissan taking over a 34 percent of Mitsubishi Motors, it now has a controlling interest in the world’s biggest maker of plug-in hybrid cars and SUVs as well.

Ghosn has brought Mitsubishi under the umbrella of Renault-Nissan and placed himself as its chairman, though he has asked current chairman and president Osamu Masuko to stay on as president.

Another three Nissan executives will join the Mitsubishi board, including chief operating officer Trevor Mann, after a deal worth ¥237 billion.

While Masuko asked to take the blame for Mitsubishi’s fuel-economy scandal (uncovered by Nissan as part of a badge-engineering deal), Ghosn insisted he would play a big part in restructuring the brand.

It also means that the Renault-Nissan alliance now joins Toyota and the Volkswagen Group as fully-fledged members of the 10-million car club and forces the Japanese industry into three camps. Nissan now partners Mitsubishi, Toyota has (at least) alliances in place with Suzuki, Mazda, Subaru, Daihatsu, Isuzu and Hino, leaving Honda out on its own.

Nissan trails only Toyota in Japanese sales and the deal gives it double the stake in Mitsubishi than it has in Renault (15 percent). Renault owns 43.4 percent of Nissan.

Nissan already has its fingers in the Mitsubishi engineering pie, parachuting its executive vice president Mitsuhiko Yamashita in to head Mitsubishi’s troubled product development department. His role was to get to the bottom of the faked fuel economy scandal, which lead to Mitsubishi forecasting a loss ¥240 million for the Japanese financial year (which ends on March 31, 2017).

Mitsubishi revealed in April that it had cheated on fuel-economy tests affecting 624,000 cars sold in Japan, though 468,000 of them were sold as Nissans, which is why Nissan discovered the cheat in the first place.

“We are a full member of the Renault-Nissan alliance from today,” Masuko said. “We look forward to learning a lot of things from Nissan. We intend to accelerate our progress and come as close as possible to where Nissan is today,” he said. “The investment by Nissan Motor will certainly contribute significantly to our company’s sustainable growth.”

He said there would be almost immediate savings from joining the alliance, with a ¥25 billion cut through synergies which would lead to a one percent uptick in profit in the first year of the tie-up and more than two percent in the third year.

Nissan will sell rebadged Mitsubishi minivans in South-East Asia but the most important move is in electrification.

Mitsubishi will tap into the Renault-Nissan expertise in battery-electric cars, while Mitsubishi’s plug-in hybrid tech will become the standard across the entire alliance.

“What we see today is low hanging fruit, and it’s already massive,” Ghosn said of the cost-cutting strategy. “Mitsubishi hasn’t even begun accounting for possible synergies with Renault, he noted, adding that full integration into the alliance will generate more.

Ghosn brought Nissan in to the Renault fold in 1999 and slashed its costs until it returned to profit, then unleashed its resources on a product offensive. Nissan’s 2016 research and development spend will be more than five times the Mitsubishi budget.

Mitsubishi Heavy retains 20 percent of Mitsubishi Motors, Mitsubishi Corp also has 10 percent, while the Bank of Tokyo-Mitsubishi UFJ has 3.9 percent.