On Thursday, October 20, Nissan Motor Co. sealed its US $2.3B stake acquisition in scandal-hit rival Mitsubishi Motors, with Carlos Ghosn taking over the role of chairman. Can Ghosn reboot Mitsubishi while overseeing both Nissan and Renault?
Mitsubishi admitted in April that the company manipulated test data to overstate the fuel efficiency of 625,000 cars. The test affected 157,000 eK Wagon and eK Space cars, and 468,000 Dayz and Dayz Roox Nissan cars, which were manufactured for Nissan. The company’s shares then dropped 15% in Tokyo – their biggest fall in almost 12 years. In the same month, Mitsubishi Motors Corp. CEO Osamu Masuko tapped Ghosn to help revive the company. After one month, Nissan agreed to acquire Mitsubishi’s 34% stake.
Under the agreement, Ghosn and three other Nissan executives will join Mitsubishi’s board of directors. Osamu Masuko will remain President. Nissan’s Trevor Mann will be also be appointed as the new Mitsubishi’s Chief Operating Officer. These changes are still pending shareholder approval in December. Mitsubishi will also name a Director of Global Risk who will oversee the company’s compliance issues. Said Ghosn: “Today, our global alliance has reached an inflection point. With Mitsubishi, the alliance will have a scale advantage over most carmakers and a handicap to none.”
The two companies revealed their plans to secure a US $473.2M worth of combined savings in the next fiscal year. Nissan will provide the strategic, operational, and management expertise, as well as the capital investment. Nissan will also utilize Mitsubishi’s expertise in the kei car and pickup truck segments in Japan. Ghosn said “The addition of Mitsubishi Motors means that the alliance created with Renault will sell 10 million units in fiscal year 2016.” Masuko, meanwhile, said Mitsubishi is looking forward to learning from Nissan and aims to accelerate the company’s progress and come as close as possible to where Nissan is today. He expects a US$ 241M worth of annual synergies from 2017. “The investment by Nissan Motor will certainly contribute significantly to our company’s sustainable growth,” he added.
Ghosn was named “Le Cost Killer” after he successfully revived Renault and Nissan. It only took him a year to reboot Renault after he was tasked to rescue the loss-ridden company in 1996, and made the then struggling Nissan as the most profitable major automaker in the world in the 2003 - labelled as one of the automotive industry’s extraordinary success stories.
As Ghosn starts to reboot the third major automaker, his main challenge is to re-establish customer trust, starting with restructuring Mitsubishi’s board. Time management is also his big challenge, as he oversees three companies – Mitsubishi, Nissan and Renault. A union representative at Renault said “The question is: can he wear three hats and do a good job?” With Masuko’s help, he will possibly use the restructuring methods used in saving Renault and Nissan. Christopher Richter, a senior auto analyst at CLSA Asia-Pacific Markets said “Masuko knows a lot about what needs to be fixed, and Ghosn will give him cover from outside criticism to make the changes.” Unleashing potential synergies is also the Le Cost Killer’s task due to Masuko's forecast of US $241.4M in annual synergies in 2017.
Mitsubishi’s future remains uncertain. But with Ghosn’s experience in reviving two companies and with the support of his executive team, successfully rebooting scandal-hit Mitsubishi is highly possible. So, are we expecting another extraordinary success story in the auto industry here? Only time will tell.
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