(story to be published in tomorrow’s issue, March 28)
DaimlerChrysler AG will pay $2.1 billion for a controlling minority stake in Mitsubishi Motors Corp, but will not win the Japanese automaker’s prized truck division, Mitsubishi said yesterday. The agreement will create the world’s third-biggest auto group in terms of sales and units sold, the companies said. “Mitsubishi is the ideal partner for us to strengthen our presence in all areas of Asia. This agreement is a milestone in our Asian strategy,” DaimlerChrysler chief Juergen Schrempp said in the statement. The German-U.S. auto giant is to take a 34 percent stake in Mitsubishi for 225 billion yen, giving it the power to veto board decisions under Japanese law. It will be paying 450 yen per share, below Monday’s close at 470 yen, which was up 51 yen or 12.2 percent from Friday. Analysts said there was still much about the alliance that was unclear, but saw immediate advantages for the Mitsubishi Motors group, burdened with a whopping 1.75 trillion yen in debt. “There’s a lot that’s still up in the air but there is no question that Mitsubishi is a lot more secure than it was,” said Stephen Usher of Jardine Fleming Securities. While details of the composition of the board and the extent to which DaimlerChrysler will get involved in Mitsubishi had yet to be revealed, the Japanese partner appeared happy. “With this alliance, we will get access to additional resources. DaimlerChrysler will add potential economies of scale which will enhance the future of our business,” Mitsubishi Motors President Katsuhiko Kawasoe said. “We will find merit in this tie-up through maintaining autonomous management and by combining our respective strengths.” The announcement came a year to the day after Renault SA unveiled its purchase of a controlling minority stake in Nissan Motor Co, which effectively gave up control to the French automaker. Mitsubishi is likely to insist on more independence. Mitsubishi and DaimlerChrysler will cooperate globally on passenger cars and compact commercial vehicles, including pickup trucks, but the deal leaves intact Mitsubishi’s pact to cooperate in the truck and bus business with Sweden’s AB Volvo. DaimlerChrysler is also to buy Ford Motor Co’s stake in Mitsubishi’s 50-50 joint venture in the Netherlands with Ford’s Volvo Cars. The pact comes at a time when a series of cross-border alliances has swept the auto industry , now facing daunting challenges such as environmental concerns, overcapacity and an urgent need to cut costs through parts and platform sharing. The deal, which removes one of the last Asian auto prizes from the pool of possible partners, was hammered out at the weekend by Schrempp and Kawasoe, who signed a letter of intent on Sunday. It was unclear whether DaimlerChrysler could complete the takeover without taking on some of Mitsubishi’s debt burden. “Excluding truck and bus debt and finance-related debt, they have about a trillion yen of debt, and this injection of capital will give them approximately 225 billion yen of new money to play with,” said Howard Smith, analyst at ING Barings Securities. “It may allow them to reduce their debt in the passenger car business by about 20-22 percent, which is a considerable help but they have a lot more problems beyond that,” he said.