Mitsubishi a Target For DaimlerChrysler
- By Edwina Gibbs
- Mar. 23 2000 00:00
TOKYO -- DaimlerChrysler and Japan's Mitsubishi Motors moved closer to a deal Wednesday that is expected to give the German-U.S. automaker effective control of Mitsubishi and create the world's third-largest carmaking group.
Mitsubishi Motors Corp. president Katsuhiko Kawasoe was authorized by the board Wednesday to decide on an alliance with a foreign automaker, which is widely expected to give DaimlerChrysler AG at least a 33.4 percent stake in Mitsubishi and veto power over its board decisions.
The effective takeover would provide DaimlerChrysler a much-needed Asian base and small car expertise while helping Mitsubishi with its heavy debt, which totaled 1.75 trillion yen ($16.4 billion) on a group basis as of the end of September.
DaimlerChrysler and Mitsubishi together make 6.5 million vehicles annually and a combination would catapult them past Toyota Motor Corp. and Volkswagen AG into the third-place spot among global automotive groups, trailing only U.S. giants General Motors Corp. and Ford Motor Co.
But investors seemed unimpressed by the deal and Mitsubishi's shares ended down 1.2 percent at 410 yen ($3.83), as analysts pointed to the long, difficult struggle faced by other foreigners that had taken control of ailing Japanese automakers.
"The market reacted coolly as investors know after seeing the Mazda-Ford alliance and the Nissan-Renault tie-up that equity links with a foreign auto giant will not mean an overnight turnaround for Mitsubishi," said Seiji Sugiura, auto analyst at Nomura Securities.
In 1996, Ford became the first foreign firm to gain control of a Japanese automaker by buying 33.4 percent of Mazda Motor Corp., but export-dependent Mazda is still struggling as a strong yen squeezes profits.
And Nissan Motor Co. has just launched a drastic three-year program of job cuts and plant closures under the tutelage of Renault SA, which took a controlling minority stake in it last year.
Although it is not clear how a deal with DaimlerChrysler may be structured, a 33.4 percent holding taken through the issue of new shares would be valued at about $1.86 billion, based on Mitsubishi Motors' current share price.
The deal would take the last available Japanese carmaker out of the pool of potential partners in the auto industry's rush to consolidate. Only Toyota Motor and Honda Motor Co. remain strong, fully independent firms.
"In negotiations with a foreign automaker, the board has entrusted the president with decisions on an alliance partner and the contents of the alliance," a Mitsubishi spokesman said.
Although the company did not identify who it is negotiating with, sources say it is DaimlerChrysler and that an announcement of a deal is likely in the next two weeks.
DaimlerChrysler chief executive J?rgen Schrempp also said Tuesday he believed a deal with an Asian automaker may happen soon, although the company declined to comment Wednesday on whether it was about to take a 33 percent stake in Mitsubishi.