Ghosn tasks top lieutenant to find Mitsubishi savings

Ma Jie
Bloomberg News

Carlos Ghosn has tasked one of his top lieutenants at Nissan Motor Co. to identify cost savings at Mitsubishi Motors Corp. as it acquires a stake in the carmaker.

Chief Competitive Officer Hiroto Saikawa, 62, is leading a team to find areas where the companies can cut costs and boost production efficiency, said Arnaud Deboeuf, an executive in charge of promoting synergies in the Renault-Nissan alliance. Adding Mitsubishi will help the French-Japanese partnership surpass its annual target of $6.1 billion in synergies by 2018, Deboeuf said.

Nissan, which plans to spend about $2.2 billion for a 34 percent stake in Mitsubishi Motors, expects common platforms and joint purchasing will yield savings equal to about 20 percent of its investment, Chief Financial Officer Joseph Peter said last month. The two companies have highlighted financial services, pickups for Southeast Asia, and plug-in hybrid and electric cars among areas they can complement each other.

“At this point, risks outweigh synergies,” said Takashi Aoki, a fund manager at Mizuho Asset Management which owns shares of Mitsubishi Motors. “The biggest concern is whether sales can resume, whether cost-cut efforts can pay off, and how long it will take to produce the synergies they envisioned.”

Fifteen years after Renault became Nissan’s largest shareholder, the two companies in 2014 shared four key functions — engineering, manufacturing, purchasing and human resources — and are targeting to produce 70 percent of their vehicles on shared platforms by 2020. The two companies, both headed by Chief Executive Officer Ghosn, have joint manufacturing projects in France, South Korea, India and Russia.

Renault and Nissan generated $4.8 billion in annualized synergies in 2015 by sharing the functions, according to Deboeuf. He declined to say when the alliance will merge Mitsubishi’s functions including purchasing and production.

“We need to be very, very rational so the team is led by Saikawa-san himself and they are identifying areas where we can make synergies,” said Deboeuf. “In the long term we will have the same approaches and same strategies” as for the alliance between Renault and Nissan, he said.

Nissan and Mitsubishi will have a long way to go to realign their manufacturing facilities, said Koji Endo, an analyst at Advanced Research Japan. Mitsubishi still operates three plants in Japan, where Nissan is struggling to fill its capacity as the yen strengthens after U.K. residents’ vote to withdraw from the EU.

“It will be very challenging to restore consumer trust in Japan,” said Endo. “Mitsubishi may be forced to close one of the lines or plants here and focus on Southeast Asia only.”

The carmakers restarted production and sales of minicars this month after recalculating the fuel economy and compensating consumers and dealers. Mitsubishi Motors Chairman Osamu Masuko has said he expects sales will be hurt by the scandal, which sent the company’s shares down by about 40 percent in its aftermath.