DaimlerChrysler Cuts New Mitsubishi Deal
DaimlerChrysler on Friday cut the price it will pay for a one-third stake in Mitsubishi Motors Corp. and installed one of its executives to help run the company after a recall scandal hammered the stock of Japan’s fourth-largest auto maker.
The German-U.S. auto maker will pay $1.9 billion, or 10% less than it agreed to in March, for a 34% stake in Mitsubishi, and named Rolf Eckrodt as Mitsubishi’s chief operating officer. DaimlerChrysler will become Mitsubishi’s largest shareholder and can raise its stake, without limitation, after three years.
DaimlerChrysler is taking more control over Mitsubishi after its stock plunged more than 25% amid revelations it covered up customer complaints for more than two decades.
On Friday, DaimlerChrysler shares fell 31 cents to $50.25 in New York Stock Exchange trading. Mitsubishi Motors said that Takashi Sonobe, 59, head of international operations, will succeed Katsuhiko Kawasoe, 63, as its president and chief executive on Nov. 1.
Kawasoe will become a nonexecutive member of the Mitsubishi Motors board, which is being expanded to 11 seats to make a place for Eckrodt, 58, currently head of DaimlerChrysler’s Adtranz train-making unit. DaimlerChrysler will have four seats, up from the three agreed to in March.
DaimlerChrysler, the world’s fifth-largest auto maker, expects to complete its investment in Mitsubishi in October.
The partnership with Mitsubishi is central to DaimlerChrysler’s growth strategy. DaimlerChrysler aims to generate a quarter of its sales in Asia within the next decade, up from the present 4%.
One limit on raising its stake is that DaimlerChrysler doesn’t want to have to consolidate the Japanese company’s debts on its balance sheet. With the new agreement holding its stake at 34%, it won’t have to do so.
Mitsubishi Motors’ debt totals about $14.2 billion. The company has lost money for two of the last three years and is expected to post another loss for this business year.
Mitsubishi Motors admitted last month it had concealed complaints about its cars for more than two decades. The disclosure prompted a recall of more than 1 million vehicles and sanctions from the government, including a ban by the Transport Ministry on purchasing its vehicles for 18 months.
