$2 billion stake taken in Mitsubishi

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Monday, March 27, 2000 | 11:09 a.m.

THE ASSOCIATED PRESS

FRANKFURT, Germany -- DaimlerChrysler AG, seeking a foothold in Asia, said today it would acquire 34 percent of Japan's Mitsubishi Motors Corp. for an alliance that would create the world's third-largest automaker behind General Motors Co. and Ford Motor Co.

The $2 billion deal creates an automotive juggernaut building 6.5 million vehicles a year and also plugs holes in each company's strategy for survival, giving DaimlerChrysler access to Asian markets and the heavily indebted Mitsubishi a partner with deep pockets.

Mitsubishi, Japan's fourth-biggest automaker, is deep in the red and needs a cash infusion. Mitsubishi has a crippling debt of $16.4 billion, and the highest debt-to-equity ratio in the Japanese car industry.

Japan's auto industry has been one of the hardest hit by the country's prolonged economic downturn, and several carmakers have sought foreign partners. In the biggest deal, Renault SA of France bought a 36.8 percent stake in Japan's debt-ridden Nissan Motor Co. in May 1999.

Ford bought a controlling stake in Japanese automaker Mazda in 1996. General Motors owns stakes in Isuzu Motors Ltd., Suzuki Motor Corp. and has plans to take a 20 percent chunk of Fuji Heavy Industries Ltd., the maker of Subaru cars.