DaimlerChrysler Reportedly Seeks Mitsubishi Stake
DaimlerChrysler is in final negotiations to acquire a controlling stake in ailing Japanese car maker Mitsubishi Motors Corp., according to several Japanese news reports today.
Neither company would confirm a deal. But analysts say if true, a tie-up makes sense on several counts. DaimlerChrysler has made no secret of its interest in Asia, the industry is in a headlong rush to find partners, and Mitsubishi needs help.
“Mitsubishi desperately needs a partner,” said Christopher Richter, analyst with HSBC Securities. “And it’s probably attractive to DaimlerChrysler that they could acquire it cheap.”
As outlined by the Yomiuri Shimbun, Japan’s largest newspaper, Mitsubishi is close to accepting a Daimler offer to acquire 34% of its shares. These would reportedly be handled through a special share placement, although no details on price were given. Under Japanese law, a shareholder with at least a 33.4% stake has veto power over key board decisions.
Mitsubishi President Katsuhiko Kawasoe notified DaimlerChrysler co-Chairman Juergen Schrempp of his willingness by telephone this week, according to the Yomiuri. Among the concerns cited from the Mitsubishi side were saving as many jobs as possible and keeping the Mitsubishi brand name alive.
Analysts say DaimlerChrysler would be interested in Mitsubishi’s small-vehicle expertise and its efficient direct-injection engines. Mitsubishi, which has struggled in Europe and remains a bit player in other areas, would gain marketing channels, deep pockets and global purchasing efficiencies. Both would be in a position to reduce their number of vehicle platforms, a major expense.
“DaimlerChrysler really needs to bolster its small vehicle presence in Europe as environmental regulations are tightened leading up to 2008,” said Nobuki Yanachi, an analyst with Kankaku Securities. “The small-vehicle technology becomes very attractive.”
If realized, the deal would create the world’s third-largest auto group, with combined global sales of 6 million vehicles. DaimlerChrysler, formed by the November 1998 merger of Germany’s Daimler-Benz and U.S.-based Chrysler, is currently No. 6 worldwide.
Mitsubishi Motors is effectively the last auto maker available in Japan for a relatively uncomplicated partnership. Honda and Toyota have both said they plan to remain independent. Ford controls Mazda Motor Corp., and General Motors is taking a 20% stake in Fuji Heavy Industries, which makes Subarus. On Friday, Toyota gained a controlling 33.8% stake in Hino Motors. And Toyota also recently consolidated its grip over Yamaha Motors.
As the development costs for fuel-efficiency, safety and environmental technologies have spiked, car makers worldwide have been in a headlong rush to partner and build economies of scale.
“As far as the world auto consolidation dance goes, we’re getting into a bit of an endgame,” HSBC’s Richter said.
Long before it was taken over by Daimler-Benz, Chrysler owned one-third of Mitsubishi and still markets some of its cars in the United States. Chrysler sold its stake several years ago.
Hisako Ueno in the Tokyo bureau contributed to this report.
