Nissan Motor will purchase a 34 per cent stake in Mitsubishi Motors, as Japan’s second-largest automaker comes to the aid of its minicar partner rocked by a fuel-economy testing scandal.

Mitsubishi Motors will sell about 237.4 billion yen ($2.2 billion) in shares to Nissan, according to a statement. The purchase is poised to vault Nissan past Mitsubishi group companies to become the single-largest shareholder of one of Japan’s smallest carmakers.

Mitsubishi Motors has admitted to manipulating fuel economy data of four minicar models, two of which are supplied to Nissan, and improperly testing other Japan models since 1991.

The scandal has exposed the extent of Nissan’s dependence on its joint venture partner for Japan sales. After suspending deliveries of the affected models for the last two weeks of April, Nissan reported a 51 per cent plunge in its monthly minicar sales.

“There is a logic to Mitsubishi Motors needing a partner, since they clearly don’t have the engineering resources to be a player in a world where technology is moving so quickly,” said Maryann Keller, an independent auto analyst in Stamford, Connecticut. “They’ve always been an also-ran in major markets like the U.S. But they actually have a decent business in Southeast Asia, so they have some attractive assets.”

The Tokyo Stock Exchange suspended trading of Mitsubishi Motors shares following reports of a potential sale. Mitsubishi Motors will probably issue new shares to sell to Nissan in a private placement, the Nikkei newspaper said.

Mitsubishi Motors shares have fallen 43 per cent since April 19, closing Wednesday in Tokyo at 495 yen. Its U.S. shares jumped 16 percent to $5.14 on Wednesday. Nissan’s shares fell 1.4 per cent to 988.3 yen as of 2.55 pm in Tokyo trading.

Nissan investors may have to wait to see further terms of the deal to discern the risk of potential scandal costs, said Joe Phillippi, principal of AutoTrends Consulting.

“There has to be an extraordinary number of provisos in there to handle any and all potential liability” related to the fuel-economy scandal, Phillippi said of Nissan’s offer. “I think they probably baked a lot of that into the bid price.”

Mitsubishi Motors said Wednesday that nine more models including a sport utility vehicle may not have been properly tested as its scandal spreads beyond the initial batch of minicars.

After first revealing it had overstated the fuel economy of its minicars by as much as 10 per cent, Mitsubishi Motors’ minicar deliveries declined 45 per cent in April and its total sales in Japan fell 15 per cent.

Nissan wasn’t involved in setting the fuel-economy targets for the minicars in question, Mitsubishi Motors President Tetsuro Aikawa told reporters during a briefing Wednesday.

Mitsubishi Motors had raised the fuel-economy targets five times for the minicar models to 29.2 kilometers/liter from 26.4 km/l in a bid to outperform the competition.

(The Independent)