Nissan has announced it will acquire a 34% stake in rival Mitsubishi Motors, in the wake of the latter’s recent scandal over fuel efficiency.
According to the Japanese auto giant, the all-share deal is valued at 237 billion yen ($2.2 billion).
Nissan CEO Carlos Ghosn has called the deal “a breakthrough transaction and a win-win” for both companies.
The tie-up is subject to regulatory approval as well as the backing of Mitsubishi shareholders.
If it is approved, the deal is expected to close by the end of 2016 and make Nissan the largest shareholder in Mitsubishi Motors.
The strategic alliance will extend an existing partnership between Nissan and Mitsubishi Motors forged over the past five years.
Both will co-operate in areas including purchasing, technology and sharing platforms.
Carlos Ghosn said: “We will support Mitsubishi Motors as they address their challenges and welcome them as the newest member of our enlarged alliance family.”
Nissan’s Alliance family is built around a 17-year cross shareholding agreement with French auto maker Renault. Nissan has also previously acquired stakes or signed partnerships with other carmakers including Daimler.
Mitsubishi Motors CEO Osamu Masuko said he hoped the deal with Nissan would restore confidence in the company: “It is not an easy task to regain trust, so through the alliance with Nissan, we will be starting a path towards tackling this difficult task.”
The tie-up was announced as Nissan reported a 14.5% rise in net profit to 523.8 billion yen ($4.4 billion) for the 12 months to March.
Nissan said rising demand in North America and China helped to offset unfavorable currency movements and weakness in emerging markets.
For the financial year to March 2017, Nissan is estimating flat profit growth and an 11% fall in operating profit due to the strengthening yen.
Carlos Ghosn said: “Encouraging demand for new models, combined with continued cost efficiency, helped us withstand currency headwinds and volatile trading conditions in several emerging markets.”
Nissan’s recently launched models including the Maxima, Altima and Titan pick-up trucks were expected to contribute to global sales growth in the coming year.
Nissan has cut its earnings forecast, saying it is feeling the pinch of tougher market conditions and recent recalls.
The Japanese car-maker now expects to make a net profit of 355 billion yen ($3.6 billion) for the year to March 31, 2014, down from its earlier forecast of a 420 billion yen profit.
The cut comes despite a rise in profit for the April-to-September period.
Nissan said that conditions in Europe remained “sluggish” while demand in emerging markets had been “volatile”.
Nissan expects to make a net profit of 355 bn yen for the year to March 31, 2014, down from its earlier forecast of a 420 bn yen profit
“Nissan’s results reflect improved demand for our new products in Japan and the Americas,” Carlos Ghosn, chief executive of Nissan said in a statement.
“This was offset by difficult conditions in Europe, volatile demand in several emerging markets and higher expenses related to recalls.”
Nissan’s net profit for the six months to the end of September rose 6.5% from a year ago to 189.8bn yen.
The company also announced management changes, which it said were “designed to enhance Nissan’s performance and ensure the company will deliver the 8% operating profit margin target set out in the Power 88 mid-term plan”.
Under the changes, Nissan’s Chief Operating Officer Toshiyuki Shiga will become a vice chairman with responsibility for external affairs, asset management and corporate governance.
The office and functions of the COO will be reorganized among three senior executives, Nissan has said.
Toyota and Nissan have announced new vehicle recalls.
Toyota is calling back 615,000 Sienna minivans in the US to fix a lever problem that could cause vehicles to shift out of park mode “without the driver depressing the brake pedal”.
Toyota said that it was aware of 24 “minor accidents” due to the issue.
Meanwhile, Nissan said it is recalling 908,900 vehicles globally due to a flaw in an accelerator sensor but added that no accidents had been reported.
Toyota’s recall applies to models made during 2004 to 2005 and 2007 to 2009
Nissan said the accelerator pedal’s sensor could become unstable, leading to a less-than-intended acceleration. It added that in a worst case scenario, the engine could stall.
Its recall affects Infiniti M, Serena, X-Trail, Lafesta and Fuga models produced in Japan between 2004 and 2013.
Toyota’s recall applies to models made during 2004 to 2005 and 2007 to 2009.
This is the second time in a month that Toyota has issued a recall of its vehicles in the US market.
Earlier in September, Toyota issued a recall for more than 780,000 vehicles in the US to address a suspension defect in its RAV4 and Lexus HS 250h models, on fears that an initial recall last year did not fix the problem
Nissan has slashed its full-year profit forecast by 20% after car sales slumped in China amid anti-Japanese protests.
The Japanese carmaker now expects a net profit of 320 billion yen ($4 billion) for the year ending March 2013, down from an earlier estimate of 400 billion yen.
Nissan says car sales plunged 35% in China in September.
A territorial dispute between Japan and China over islands in the East China Sea has led consumers in China to boycott Japanese products.
Among Japanese carmakers, Nissan has been hardest hit by the anti-Japan sentiment.
Koji Endo, automotive analyst with Advanced Research Japan, said that close to 30% of Nissan’s vehicle sales come from China. By way of comparison, rival Toyota relies on China for about 10% of its global sales.
The company trimmed its 2012 China sales forecast to 1.175 million vehicles from a previous 1.35 million.
Nissan has slashed its full-year profit forecast by 20 percent after car sales slumped in China amid anti-Japanese protests
However, chief operating officer Toshiyuki Shiga said the company remains committed to China with no major changes in its long-term growth plans.
He did say, though, that it will assess future investments cautiously.
“We are gradually seeing signs of recovery [in China]. Customers are gradually coming back to dealerships,” Toshiyuki Shiga told reporters on Tuesday.
He said visitors to the company’s China dealerships were back to around 80% of pre-dispute levels, and orders were running at about 70%.
Nissan’s fortunes contrasted sharply with German carmaker BMW, which announced a record pre-tax profit of 2 billion euros ($2.5 billion) in the third quarter, thanks largely to booming sales in Asia.
The world’s largest luxury carmaker saw sales in China and Japan rise by 33% and 21.5% respectively in the nine months to the end of September.
Nissan said its setback in China was somewhat countered by growth in sales elsewhere, however, including in the US, Indonesia and India in the July-to-September quarter.
The company posted a net profit of 106 billion yen, an almost 8% rise compared with the same period last year.
Koji Endo said he remained optimistic about Nissan’s overall growth as the US market “seems to be very strong” for Nissan, and other Asian countries could also make up the shortfall in China.
“Asia is another very strong market especially in Thailand and Indonesia, Nissan seems to be aggressively investing in Thailand, so hopefully in the future, any weakness in the Chinese market can be offset by Thailand, Indonesia as well as in the US,” said Koji Endo.