Nissan Motor may buy controlling stake in embattled Mitsubishi Motors for $1.85 bn

Japanese car makers Nissan Motor Co and Mitsubishi Motors Corp today confirmed market rumours that they were discussing a possible capital tie-up.

Japanese broadcaster NHK yesterday reported that Nissan is in advanced talks to buy a 33-per cent stake in Mitsubishi Motors for¥200 billion ($1.85 billion) after Mitsubishi yesterday revealed that its cheating on gas mileage ratings extends to more models than previously revealed.

"Nissan and Mitsubishi are discussing various matters including capital cooperation, but nothing has been decided," the two Japanese automakers said in separate statements.

Mitsubishi Motors' shares were suspended from trading after news emerged of the possible tie-up.

A 33-per cent stake would make Nissan the single largest shareholder in Mitsubishi Motors.

Currently, Mitsubishi Heavy Industries Ltd is Mitsubishi Motors's biggest single shareholder with about a 20 per cent stake, followed by Mitsubishi Corp with 10 per cent, Bank of Tokyo-Mitsubishi UFJ with 4 per cent.

Nissan and Mitsubishi already are in partnership for developing and producing several mini cars with 0.66 liter engine displacements for the Japanese market, but these sales have stopped since late April after Mitsubishi acknowledged that it had overstated the fuel economy for these cars.

Mitsubishi last month admitted that it overstated the fuel economy of four of its mini-vehicle models for the Japanese market - the Dayz and Dayz Roox which are marketed under Nissan's brand name, and two other models under the Mitsubishi brand.

On Wednesday, Mitsubishi Motors extended its cheating on fuel mileage ratings to nine models sold in Japan and others that are no longer sold, encompassing virtually all the models it sold in its home country.

"Internal hearings suggest that running resistance was improperly calculated in nine other models currently sold in Japan, as well as in other models no longer sold in Japan," Mitsubishi said in a statement.

During the development of the fuel-economy grade, the fuel consumption target was raised a total of five times, from 26.4km/L to 29.2km/L. The hiking of fuel consumption target was because of Mitsubishi's deep concern regarding new competitor fuel consumption levels.

Analysts opine that Mitsubishi will face up to $1 billion in compensation payments to its customers and its partner Nissan.