Daimler tightens its grip on Mitsubishi

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The Independent Online

Daimler Chrysler, the world's third-biggest car maker, yesterday tightened its grip on Mitsubishi Motors, the scandal-hit Japanese group.

Daimler Chrysler, the world's third-biggest car maker, yesterday tightened its grip on Mitsubishi Motors, the scandal-hit Japanese group.

Katsuhiko Kawasoe, the president of Mitsubishi, resigned yesterday over the cover-up of customer complaints at the company, a practice that stretches back 30 years and has led to the recall of more than 600,000 cars. Japanese authorities said they would press criminal charges against Mitsubishi.

Mr Kawasoe will be replaced by Takashi Sonobe, 59, Mitsubishi's head of international operations, who is considered to be highly westernised.

But DaimlerChrysler said it was installing Rolf Eckrodt, who currently runs its railway subsidiary, Adtranz, as Mitsubishi's chief operating officer. DaimlerChrysler will also increase its board-level presence at Mitsubishi, from the three members originally envisaged, to four out of 11 board directors.

The German company also revised down the price at which it is taking a 34 per cent stake in Mitsubishi, a move announced in March that will give it a greater presence in the smaller car market and in Asia's emerging economies. The price for the issue of new shares has now dropped from $2.1bn (£1.5bn) to $1.9bn, and a "standstill agreement" has been reduced from 10 years to three, after which it can increase the stake. The revised deal is expected to be closed next month.

Andrew Blair-Smith, an analyst at Commerzbank, said: "DaimlerChrysler gets effective control through this. It can now clean Mitsubishi up, before increasing its holding."

DaimlerChrysler is thought to be reluctant to take its stake above 40 per cent at the moment because it would have to consolidate Mitsubishi's near £10bn of debt on to its balance sheet.

Mr Eckrodt, 58, has worked at Daimler-Benz since 1966, and is credited with a turnaround at Adtranz, which he has led for two years. The railway unit has been brought out of the red, through 3,000 job cuts and 6 factory closures. Adtranz is being sold to Bombardier, the Canadian transport engineering group.

Japan's car makers have suffered from the recession in their home market, coupled with export difficulties caused by a strong yen. Only Toyota and Honda now remain independent, withRenault having taken a 37 per cent stake in Nissan and Ford holding 33 per cent of Mazda.

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