Nissan, Mitsubishi Boost Ties, Target Middle East Market

Nissan will provide a light van and wagon to Mitsubishi in Japan, which would in turn make an SUV for its partner to sell in the Middle East.

Nissan and Mitsubishi Motors said on Dec. 14 that they would deepen cooperation in making cars as the firms seek out new markets and try to counter the effects of a strong yen. The firms also said they were looking at a possible tie-up that will pool resources to deal with ever-tougher domestic and overseas markets.

Nissan, part-owned by Renault, will provide a light van and wagon to Mitsubishi in Japan, which would in turn make a sports utility vehicle (SUV) for its partner to sell in the Middle East.

Nissan CEO Carlos Ghosn said the deal "supports our expansion in emerging markets, meets immediate capacity needs overseas, and enables us to grow our mini car business in Japan."

Mitsubishi Motors president Osamu Masuko said the partnership aims to help both sides "amid the drastically changing economic and market environments."

In the longer run, they are studying the "establishment of a 50:50 joint venture for product planning and engineering of mini cars for the Japanese domestic market", the two companies said.

"Automakers cannot go it alone these days," said Akira Kamimura, auto sector analyst at Japan Credit Rating Agency. "And this is just another example showing they help each other with their areas of expertise and to reduce costs. Nissan excels in mini commercial vehicles and Mitsubishi, which supplies SUVs to Peugeot, has a huge presence in the Middle East market."

The deal comes as Japanese automakers struggle to cope with the yen's strength against other major currencies -- it hit a 15-year high against the dollar in September -- which has forced them to scale back production.

And despite posting impressive earnings results recently, there are concerns about the near future as a government subsidy to encourage motorists to buy eco-friendly cars ran out in September. The measure had proved a life-saver for the Japanese auto sector as it boosted demand in the wake of the crippling effects of the financial crisis.

Nissan and Mistubishi have supplied each other with some models since 2003 that they have marketed under each other's brands in Japan, using agreements known as Original Equipment Manufacturing (OEM) accords. Nissan makes a commercial van for Mitsubishi, which in turn produces four models for Nissan, including the eK Wagon and Minicab mini vehicle models, according to Dow Jones Newswires.

The companies said they are also in talks for Nissan to provide Mitsubishi with upper-end segment models for the Japanese domestic market.

Additionally, they are looking at plans to manufacture the Nissan Navara pickup truck at Mitsubishis plant in Thailand, and studying whether to cooperate in building a new generation one-ton pickup truck.

Ghosn said the two companies are not considering a capital alliance.

He also said that, although both make electric vehicles, "it's too early" to speak about cooperation. "But there is no absolute opposition to cooperate. We can if we have a win-win situation, if we have a mutual benefit."

Masuko said expanding the OEM deals "will complement each others regional characteristics and product lineup."

Copyright Agence France-Presse, 2010

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