Nissan, Renault, and Mitsubishi are attached at the hip. That’s because Renault under the aegis of Carlos Ghosn bailed out Nissan and then later Mitsubishi. And in Japan, every car company owns at least a small stake in its competitor’s business. But Nissan will kill Mitsubishi if it does what is being rumored.

The alliance has been a problem for Nissan and Mitsubishi for some time

This three-way is called an alliance, and it has been a problem for both Nissan and Mitsubishi for some time. Neither wants decisions to come from outside sources-especially from another company in another country. But both Nissan and Mitsubishi have bigger problems. In Ghosn’s absence, the two have become mired in debt. 

To salvage the partnership or alliance Renault has given the green light to separating products in different countries and territories. By carving up where its vehicles can and can’t be sold it intends to stop the cannibalization of all car companies in the alliance. But it also means reducing each company’s global footprint. 

Mitsubishi only sells a fifth of the number of vehicles that Nissan does according to Automotive News. So jettisoning Mitsubishi could kill it. A bigger question is that if consolidation is seen by most as the means for companies to stay in business, then why separate this alliance? Shouldn’t this arrangement put the company as a whole in a better position to reap economies of scale? 

Nissan purchased a 34% stake in Mitsubishi in 2016

Nissan purchased a 34% stake in Mitsubishi in 2016. The deal was constructed and pushed by Nissan CEO Ghosn and Mitsubishi CEO Osamu Masuko. Now both are no longer with the company. Ghosn has been involved in a drama that will probably become a movie after he was arrested in Japan in 2018 for serious abuses against Nissan. He escaped jail a year ago and is now hiding out in his native Lebanon. Masuko died this past August from heart failure. 

Renault has a 43% stake in Nissan. The reason Nissan would dump Mitsubishi is to generate cash. The problem here is that Nissan might have to take a huge loss selling off its stake in Mitsubishi. According to Bloomberg Nissan’s 34% stake in Mitsubishi is worth $950 million. That is about half of what it paid for the manufacturer. 

Both companies went into overdrive to kill the rumors

When news surfaced about the potential sale both companies went into overdrive to kill the rumors. As it stands now Mitsubishi will follow its “Small But Beautiful” path. This means pulling out of Europe entirely, giving it to Renault. And it would also pull back significantly from both China and its home market of Japan. As for the US, that seems to be a big question internally.

Mitsubishi is doing poorly in the US. While Honda, Subaru, and Toyota continue to show improvement for 2020, the same cannot be said for Mitsubishi. And Nissan is expected to have the largest operating loss in its history in 2020. In the first nine months of this year, Mitsubishi’s sales are down by a quarter, to 72,617 total units sold. 

Mitsubishi is bleeding roughly $1.3 billion in operating losses. Its net loss is expected to be $3.35 billion. That’s a deep, dark tunnel to try and find light in.