|The top independent makers of automatic and continuously variable transmissions, by annual volume, in millions|
|*-plan to combine Source: Jatco TransTechnology Ltd.|
The move appears to create the biggest standalone maker of automatic transmissions.
"For Mitsubishi, this will be our largest-ever spin-off," said Hiroshi Yajima, a Mitsubishi senior vice president. "This is a very important part of our turnaround plan."
Under terms of the deal, Mitsubishi will exchange its transmission operations for a stake in Jatco TransTechnology Ltd., Nissan's 99.7 percent owned transmission unit, by the middle of next year. Details won't be final until April, but it is expected that Mitsubishi will receive 20 percent of Jatco.
Nissan has designated Jatco as one of only four core subsidiaries that it will not spin off. But Yajima said Mitsubishi had decided its automatic-transmission operations were not a core business, and therefore were eligible for spin-off.
"We are trying to identify those operations that are core and non-core," Yajima said. "Those that are non-core will be subject to outsourcing, without exception, unless there is no benefit."
Because Jatco is not publicly traded, Mitsubishi will be unable to convert its stake in Jatco into cash immediately. But Kiyoto Shinohara, Nissan's vice president for finance, said that if Jatco's business grows, the company could be taken public through a stock offering.
Nissan and Mitsubishi are selling off assets to pay down huge levels of debt. Compared to Nissan, though, Mitsubishi does not have as many non-operational assets, such as real estate, to sell. Mitsubishi received little in the way of real estate and other tangible assets when it was spun off from Mitsubishi Heavy Industries Ltd. in 1970.
The enlarged Jatco will challenge the Toyota Group's Aisin AW Co. for the title of world's largest independent automatic transmission maker. Last year, Jatco built 2.2 million automatic transmissions and CVTs, while Mitsubishi built 1.05 million. Aisin AW built about 3.3 million.
The combined company aims for 4 million units within a few years. Both Nissan and Mitsubishi expect to procure almost all of their CVTs and automatic transmissions from the expanded Jatco.
Jatco sells about 75 percent of its output to Nissan. Even before the Mitsubishi deal, Jatco had sought to drop that dependence to 60 percent, Sasaki said.
Jatco's other customers are BMW AG, Jaguar Cars Ltd., Hyundai Motor Co., MG Rover Group Ltd., Volkswagen AG, Subaru-maker Fuji Heavy Industries Ltd., Isuzu Motors Ltd., Nissan Diesel Motor Co., Suzuki Motor Co. and Mazda Motor Corp. Mazda once was a part-owner of Jatco, along with Ford Motor Co.
But Jatco does not sell to Renault SA, which owns 36.8 percent of Nissan, or DaimlerChrysler AG, which owns 34 percent of Mitsubishi.