Mitsubishi in talks with Nissan for small sedan

TOKYO -- After dropping Renault SA as a possible partner for small- and midsize sedans, Mitsubishi Motors Corp. has entered talks with Nissan Motor Corp. as an alternative source for a badly needed midsize vehicle.

Nissan and Mitsubishi began discussions after Mitsubishi's talks with Nissan's alliance partner Renault broke down, according to a Nissan source familiar with the situation.

An agreement would help Mitsubishi plug a hole in a sparse U.S. lineup that is hurt by an aging compact Lancer sedan and the discontinuation of the larger midsize Galant.

A Mitsubishi spokesman said plans to replace the Galant are on indefinite hold but that efforts are still underway to salvage a small successor to the Lancer.

Mitsubishi may end up developing the car itself. But it is also looking for partners to help it shoulder r&d and production costs, he said.

While he declined to confirm whether talks with Nissan have begun, he said working with the Japanese rival is "one option."

Mitsubishi is prioritizing a Lancer replacement because it is a global car with demand in multiple markets, including the U.S. The large sedan it had been considering with Renault was seen mainly as a North America-only offering.

The Nissan source said a small sedan may be built in either North America or Japan, though he said nothing has been decided.

Talks with Renault had focused on getting sedans from that company's assembly plant in Busan, South Korea. A Mitsubishi source said his company pulled the plug partly because the sudden appreciation of the Korean won against the dollar and Japanese yen undercut the plan's profitability.

Mitsubishi's U.S. sales rose 25 percent in 2014 to 77,643 units, largely on demand for the Outlander Sport compact crossover and Mirage compact hatchback.

Lancer sales fell 15 percent to 16,495 in 2014, though they surged 68 percent to 1,515 in January. The brand, which is positioning SUVs and crossovers at the center of its revival, has been absent from the midsize sedan segment, one of the industry's largest, since dropping the Galant in 2012.