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The BBC's Patrick Bartlett reports
"Mitsubishi has been scouting for a partner"
 real 28k

Monday, 27 March, 2000, 12:15 GMT 13:15 UK
DaimlerChrysler seals Mitsubishi deal
Mitsubishi's Shogun
Deal creates the world's third-largest car manufacturer
The multinational car and lorry manufacturer, DaimlerChrysler, is paying $2.1bn (1.3bn) for a controlling stake in Japanese car maker Mitsubishi Motors.

The deal makes DaimlerChrysler the world's third-biggest car manufacturer in terms of number of sales, behind only General Motors and Ford.

DaimlerChrysler chief
DaimlerChrysler chairman Juergen Schrempp
By taking a 34% stake, which under Japanese law gives it power to veto board decisions, DaimlerChrysler will become the largest shareholder.

Mitsubishi Motors - Japan's fourth-biggest car maker after Toyota, Honda and Nissan - is burdened with huge debts of $16bn (10bn) having been hit hard by the Asian economic crisis.

DaimlerChrysler's chairman and chief executive, Juergen Schrempp, said his company would not be taking over the debts.

New small cars

He said the alliance would be concentrating on developing two new models to add to DaimlerChrysler's A Class Mercedes and the Smart car in the small car market.

DaimlerChrysler brands
Mr Schrempp also indicated the global strategy behind the move: "Mitsubishi is the ideal partner for us to strengthen our presence in all areas of Asia."

However, DaimlerChrysler will not gain control of Mitsubishi's prized lorry manufacturing division through the deal.

There will be co-operation on passenger cars and compact commercial vehicles, including pick-up trucks, but the deal leaves intact Mitsubishi's lorry and bus alliance with Volvo of Sweden.

Volvo holds a 5% stake in Mitsubishi Motors and this will rise to 19.9% of the lorry business when it is split off.

Contract to be signed

After much speculation that a deal was imminent, Mr Schrempp and Mitsubishi Motors president Katsuhiko Kawasoe signed a letter of intent in Stuttgart at the weekend.

Mitsubishi president
Mitsubishi Motors president Katsuhiko Kawasoe
A statement said the final contracts would be signed within the next three to four weeks, although some analysts believe the deal could still fail.

Stephen Usher of Jardine Fleming Securities said: "There's a lot that's still up in the air but there is no question that Mitsubishi is a lot more secure than it was."

Raises Peugeot deal doubts

DaimlerChrysler and Mitsubishi together make 6.5 million vehicles annually and a link-up moves them past Toyota and Volkswagen into third place among global motor groups.

The announcement came a year to the day after French car firm Renault bought a controlling minority stake in Nissan of Japan.

Mitsubishi would be expected to have to follow in the footsteps of Nissan, now undergoing painful restructuring under its new bosses.

The deal leaves only Toyota and Honda as fully independent large-scale Japanese car makers.

It also throws into doubt talks between DaimlerChrysler and French firm Peugeot, which were focused on co-operation on small cars.

DaimlerChrysler is also buying Ford's stake in Mitsubishi's European joint venture with Ford subsidiary Volvo cars.

Shares in both DaimlerChrysler and Mitsubishi Motors rose after the announcement.

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See also:

15 Mar 00 | Business
Automotive Empires
27 Oct 99 | The Company File
Mitsubishi Motors to cut 9,900 jobs
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