| 3:41 PM EST

Why Nissan May Sell Mitsubishi Stake—or Not

Semantics belie a search for possible funding option for Nissan’s turnaround.
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Is Nissan thinking about selling off some or all of its 34% controlling stake in Mitsubishi Motors?

Yes it is, unidentified sources tell Bloomberg News. “Absolutely not,” Chief Operating Officer Ashwani Gupta tells Reuters. MMC says there have been no discussions between the two carmakers about altering their equity arrangement.

Nissan. Mitsubishi.

What’s Going On?

So who’s right? In this case, the answer may well be “all the above.” The key is what each party isn’t saying.

Nissan has been reviewing its operations for a year to reverse slumping sales and hefty financial losses. It’s highly unlikely that such a review would fail to include investments and business units.

Bloomberg’s sources say Nissan is “exploring” options for selling at least some of its MMC holding. But that doesn’t mean a sale is likely—let alone imminent—unless Nissan decides to move ahead.

If and until it makes that choice, Nissan is technically correct in declaring it is “absolutely not” currently in talks to sell...because it’s still discussing whether to open that discussion.

If that’s where we are, then MMC’s statement also makes sense. Talks between the two carmakers about adjusting ownership stakes are not going to begin until Nissan decides the subject is worth discussing.

Funds Needed

Certainly Nissan has good reason to consider dumping its MMC equity.

Nissan posted a $6.4 billion net loss for the fiscal year ended March 31. The company lost another $3.2 billion in 2020 between April and September.

Now the company is in the midst of a four-year turnaround plan to slash its annual fixed costs by $2.8 billion, shrink its product lineup, cut annual production capacity by 600,000 units and shed some 14,000 employees worldwide.

In September, Nissan used a bond sale to round up more than $12 billion to bolster its liquidity. But it also has continued to look for other fund-raising options. Which is where MMC comes in.

Renault Nissan Mitsubishi

Repercussions

Nissan bought its stake in MMC four years ago for 237 billion yen ($2.3 billion). At the time, MMC shares were trading at about $4.60 per share. Now they’re at around one-third that amount.

Opting to give up control of MMC would throw another unsettling factor into the future of Nissan’s 21-year-old alliance with Renault. Mitsubishi, as an affiliate of Nissan, joined the partnership as a junior member three years ago.

But the three companies have struggled to steady their alliance since the November 2018 arrest of Carlos Ghosn, then chairman of all three companies, on charges of financial wrongdoing. Ghosn, who describes himself as an innocent victim of a conspiracy, jumped bail nearly a year ago and remains in exile in Lebanon.

What’s Next?

Nissan will soon decide whether to shed MMC. It’s not an easy call.

One thing is certain: Moving ahead would mark a big step in Nissan’s determination to replace the empire Ghosn was building with a smaller and more sustainably profitable business.

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