Mitsubishi chief says 3 partners are stronger as 1

TOKYO -- Mitsubishi Chairman Osamu Masuko defended his company's alliance with Nissan and Renault amid a barrage of shareholder skepticism, saying the carmaker needs the expertise and scale of its larger partners, especially as it pursues a new business strategy of "small but beautiful."

But the Mitsubishi boss also warned that the companies must work better together.

"We have come to see issues with the alliance," Masuko said last week at Mitsubishi Motors' annual shareholder meeting. "Depending on how we manage the alliance, we might not be able to deliver the results we expect. That is the reality. So we need to strengthen ourselves."

Mitsubishi intends to coordinate more closely with Nissan on future direction, he added.

Masuko's assessment comes as Mitsubishi finds itself squeezed by an increasingly strained relationship between the alliance's big players, Nissan Motor and Renault.

Carlos Ghosn had been chairman of Renault, Nissan and Mitsubishi, seeming to hold together the alliance by sheer force of will. But trust and cooperation between Nissan and Renault have crumbled since Ghosn's arrest in Japan last year on allegations of financial misconduct.

The tension puts Mitsubishi in a sensitive spot. As the smallest partner, Mitsubishi needs the bigger players' technological, purchasing, manufacturing and logistical firepower.

But Mitsubishi is also more closely aligned with Nissan, because of shared roots as a Japanese company and because Nissan is its controlling shareholder with a 34 percent stake. While Renault has a controlling 43 percent holding in Nissan, it has no direct stake in Mitsubishi.

Skeptical shareholders peppered Masuko with questions about how Mitsubishi benefits from the alliance, which it joined in 2016 when Ghosn engineered Nissan's takeover bid.

Masuko said a top benefit is scale in an auto industry under siege by an influx of new technologies and new competitors.

Teaming with Renault and Nissan, he said, helps Mitsubishi cut costs, share investments and improve its products through better benchmarking.

"In this time of great change, it is not realistic to respond to all these changes," Masuko said of those who would go it alone. "There are a number of benefits we have gained from the alliance."

Masuko cited last week's tie-up with Waymo as an example of how Mitsubishi gains.

Under that breakthrough agreement, Waymo, the autonomous-driving subsidiary of Alphabet, will work with the alliance to develop self-driving systems for a range of vehicles that will ferry passengers and packages.

"For advanced technologies, it is beneficial for us to tackle them through the three-party alliance," Masuko said. "I think the alliance will generate benefits for us."

Getting by with the help of friends is all the more important for Mitsubishi as Masuko prepares a new global business strategy to transform the carmaker into a "small but beautiful" one.

The fresh approach, which will be implemented starting in the next fiscal year, aspires to a more profitable business with steady growth, even if it means missing out on rapid volume expansion. As part of the plan, Mitsubishi will redouble its focus on its strengths, such as small cars for emerging markets, especially in its Southeast Asia stronghold.

Electrified and all-wheel-drive offerings will be another pillar, Masuko said. As part of the push, he said, all core nameplates in Japan will be electrified in the fiscal year ending March 31, 2024.

Leading that charge will be Takao Kato, tapped last month as the next global CEO. His appointment to the board was approved by shareholders last week.

They also ratified a corporate-governance overhaul to create separate committees overseeing executive nomination, executive remuneration and corporate auditing.

The new structure is supposed to improve accountability and transparency while preventing the kind of concentration of power critics say occurred at Nissan during Ghosn's tenure.

Nissan shareholders will be asked to approve similar reforms when they meet Tuesday, June 25. That is expected to be a contentious gathering focused on relations with Renault and the question of how CEO Hiroto Saikawa should best take responsibility for his company's troubles.

Masuko drove Mitsubishi to record profit after years of losses, and under his tenure as outgoing CEO, U.S. sales rose every year. Mitsubishi reported a 14 percent increase in operating profit to about $1 billion in the fiscal year ended March 31, as worldwide retail sales rose 13 percent to 1.24 million vehicles.

Looking ahead, Masuko told shareholders that Mitsubishi will pause its ambitious plans to boost volume and regroup to focus on sustainable profitability.

"Instead of rushing to pursue expansion, I am convinced that pursuing a good balance between investment and healthy growth is the best option for us," Masuko said.

"This concept is characterized as 'small but beautiful.' We have redefined a future direction in which we will pursue strong profitability in spite of being a small player."