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Mitsubishi to supply cars to Nissan

Mitsubishi Motors Corp, which has been seeking partnerships to bail itself out of its deep financial woes, will supply minicars to Nissan Motor Co, both sides said yesterday. Mitsubishi Motors will supply 36,000 minicars a year to Nissan starting in the first half of fiscal 2005, which begins April 1.

Both Nissan and Mitsubishi had said they were talking about a possible tie-up, and the agreement was not a major surprise.

Nissan, which does not make its own minicars, now gets minicars from Suzuki Motor Corp, a Japanese automaker that specializes in minicars, under an OEM agreement.

The purchase by Nissan is part of the company's expansion to bolster its market share. Mini vehicles, with engines smaller than a 0.66-liter capacity, are the only type of automobiles that increased sales in Japan last year.

Nissan saves time and cuts development costs by buying an existing model from Mitsubishi, a move that's estimated to add ?1 billion (US$9.8 million) of extra operating profit to the carmaker, according to an estimate by Credit Suisse First Boston's analyst Koji Endo.

Mitsubishi boosts its operating profit by ?4.5 billion (US$44 million) after selling the models to Nissan, Endo said.

"For Mitsubishi Motors, it is still one step forward" even if the financial contribution from this transaction is "limited" for both parties, Endo said.
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