Nissan Motor’s move to acquire
a 34 pc equity stake in Mitsubishi Motors Corporation (MMC) will lead to a lot
of advantages for Nissan as well MMC, besides reducing costs of development and
introducing many more vehicles on a common platform. This was stated by Carlos
Ghosn, Chairman and CEO of Japan-based Nissan Motors. Ghosn is also the Chairman
and CEO of France-based Renault, Chairman of Russia-based automobile
manufacturer AvtoVAZ and Chairman and CEO of the Renault-Nissan Alliance.
Ghosn was addressing a media
roundtable that consisted of journalists belonging to Australia, Hong Kong, India, Indonesia,
Malaysia, Philippines, Singapore, Thailand and Vietnam immediately after his
company announced that it had signed a Basic Agreement with MMC to form a
far-reaching strategic alliance between the two Japanese automakers. Following
an MMC share issue, Nissan will take a 34pc equity stake in MMC for 237 billion
yen (US $ 2.2 billion---Rs 14,459 crore approximately).
The transaction is subject to
the signing of a definitive Alliance Agreement, expected by the end of May,
2016, the signing of a shareholders agreement with the current Mitsubishi Group
shareholders of MMC and regulatory approvals. It is expected to close by the
end of the year.
In India, though Nissan and
Renault function as two different companies, they have a common plant in
Chennai in the South Indian State of Tamil Nadu, under the Renault Nissan
Alliance. Mitsubishi Motors, on the other hand does not have its own plant in
India as it assembles its vehicles in the Hindustan Motors plant in Thiruvallur
in Tamil Nadu.
“It is win-win for both
companies. However Nissan wins twice – both through synergies as well as
through its 34% shareholding in MMC, giving us 34% of their wins too,” Ghosn
told journalists. .
Ghosn further added that his
company would maintain the Mitsubishi brand, post the equity purchase, and will
share technology, exchange best practices, etc. “You will be able to see in
months and years to come that MMC will get out of its current struggles as a
much stronger company, through the strong support of our expanded alliance,” he
Through the strengthened
relationship, MMC will be able to grow faster, he maintained. “Just looking at
a simple equation, by taking a share in a company that is profitable and will
grow more, it will benefit both companies. MMC is much smaller than Nissan,
producing 1 million vehicles per year, whereas Nissan produces 4.0 million.
“If we are sharing some
platforms, for example, with similar products, we may stop a platform at MMC,
then the benefits will be much bigger for MMC. They no longer have the cost of
the platform, they can share the Nissan platform to develop their branded
products, paying Nissan a small fee to use that platform, as well as reducing
platform development costs. Nissan can share the platform costs with MMC,
thereby reducing purchase costs. We can share the cost of the development of
technology, will have lower platform costs, etc. Some platforms will be Nissan,
some will be MMC.
“We will share best practice
in regard to regional operations strengths. MMC is much stronger in South East
Asia, which gives Nissan an opportunity to learn from them. In other markets,
MMC will learn from Nissan,” he said.
As far as electric vehicles
are concerned, he said both Nissan as well as MMC have platforms for electric
cars and “we can work together on one platform. However the vehicles we produce
will look different as both companies have different specs, but the core
technological aspects are the same”. But marketing and sales for each of the
Alliance companies will be separate and different. “Some dealers might have two
brands in one showroom. But marketing and sales will be totally separate and
distinct, in line with the brand identities of both companies,” he noted.
On being asked as to what Mitsubishi can bring to the
Alliance that Nissan/Renault does not have, he said, “There is some technology that MMC has that
Nissan doesn’t have – e.g. plug-in hybrid technology. This is good for Nissan.
We can immediately leverage their platform, reducing our technology development
costs, and MMC can increase scale which will decrease their development costs.
There is some specific technology that will help both companies. This is all
about sharing and benefiting from larger scale. At the moment MMC needs support
and we can bring this through our strengthened alliance.”
As far as synergies from
sharing platforms are concerned, Ghosn noted, “A new platform costs in the
region of $500 million dollars. One platform usually lasts 15 years. We have
nine common platforms between MMC and Nissan. Investment in a platform, as I
mentioned is $500 million. Instead of building our own platforms, we can use
our partner’s platforms. Whilst this is a big saving for you, you have to pay
partner for use of their platform – but this much less than building one from scratch.
So it’s a win-win. Customers don’t care about the platform. They do care about
design, and the tuning of the car amongst other things. We have been sharing
modules with Renault – but the vehicles we produce are very different. There is
When Ghosn was told that MMC
was recently involved in a scam wherein the company had admitted to committing
some emissions fraud, he said, “Yes, they currently have some problems, and
management is very conscious of this. They are sincerely concerned. They will
do what needs to be done to rebuild trust. We will support with our own
knowledge and experience. You need to be patient.” But he categorically denied
that this scam will tarnish the reputation of Nissan and Renault. “The
reputation of Renault has been consistent for the last 17 years and has no
impact on Nissan. And vice-versa,” he added.
He concluded by saying that
the 2016 forecast for all the companies in the Renault-Nissan Alliance is that
they are looking at production of 10 million cars 2016. “This puts us in top
three globally. However volume not the objective of this alliance– it is a
consequence of a job well done. The alliance will maximize volume, although it
is not the objective. Economies of scale, increased competitiveness, and other
initiatives will both reinforce and lead to volume increases,” he stated.