Nissan Just Bought 34 Percent Stake in Mitsubishi

By Edge Ison , Oct 21, 2016 04:27 AM EDT

Nissan Motor Co. Ltd. purchased 34 percent of controlling stake in Mitsubishi Motors Corp. The plan, which was announced back in May, was finalized on Thursday.

Nissan, Japan's second-largest automaker, invested $2.29 billion or 237 billion yen on a company that is still suffering from a cheating scandal. Mitsubishi Motors, the sixth largest car manufacturer in Japan, admitted to manipulating data regarding the fuel economy of their vehicles for over a quarter of a century. Mitsubishi has been using the "coast-down" test to alter results for almost 25 years. This method is unapproved by the industry.

The company first confirmed that four of their market vehicles belonging to the kei car segment were involved in the fuel-economy scandal. However, after an investigation by the Japanese Transport Ministry, it was discovered that eight other vehicles had manipulated data. The popular Outlander SUV is one of the eight vehicles that were marketed to have 10 percent lower mileage than what actual tests recorded.

According to a report, Osamu Masuko will remain as the President and CEO of Mitsubishi. Nissan, however, will place its own chief operating officer. This comes after calls for Masuko to resign his post. Carlos Ghosn, CEO, and chairman of Nissan and Renault will lead the board of Mitsubishi.

Nissan and French automaker Renault have indicated that they plan to "turn things around" by improving the company's management system. Nissan itself was in the doldrums before Renault came and salvaged the company. The company plans to save $230 million by 2017 through cost cutting, a move that the Renault did when they acquired Nissan.

The cost-cutting plans of the Alliance involve grouping resources together to lessen redundancy within the company. This method allowed Nissan to save $577 million during the second year after the Renault acquisition and they believe the same course of action will work for Mitsubishi.

The move by Nissan and Renault allows Mitsubishi to be part of their Alliance.

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