Reports: Nissan wants to sell parts supplier Calsonic Kansei

Tokyo — Nissan Motor Co. Ltd.'s possible sale of Calsonic Kansei Corp., one of its biggest suppliers, would cast off a final vestige of the carmaker's keiretsu system of intertwined parts makers.

It also would inject cash into Nissan as it funds expensive projects in electrified and autonomous cars — not to mention its looming purchase of a controlling interest in Mitsubishi Motors Corp.

Buying the proposed 34 percent controlling stake in Mitsubishi would set Nissan back some $2.2 billion, and the carmaker aims to finalize the takeover by the end of this year.

The Japanese media initially reported that Nissan was considering selling its 41 percent stake in Calsonic Kansei less than two weeks after Nissan said it would splurge on buying Mitsubishi.

Nissan has not confirmed its intent to sell.

A Nissan spokesman described Calsonic Kansei as one of the "most important partners" of Nissan and Renault SA, its French alliance partner. But he added: "We are always considering various options that would lead to increasing their competitiveness."

A person familiar with the matter said Nissan is exploring the sale as part of its long-term strategy of shedding major stakes in suppliers, especially suppliers producing commodity parts.

A Calsonic Kansei spokeswoman declined to comment on the matter.

Calsonic Kansei is a top maker of auto interiors, electronics and climate systems. Producers of such products have been under pressure from low-cost rivals in China and elsewhere, while automakers shift their focus on partnerships to advanced-technology companies.

Its U.S.-based Calsonic North America Inc. includes two plants with injection molding of interior parts. It was No. 67 in Plastics News most recent ranking of North American injection molders with an estimated $134 million in injection molding.

In 2013, Calsonic North America invested $109 million across three sites in Tennessee, including its injection molding plant in Lewisburg. Its other North American plastics plant is in Aguascalientes, Mexico.

The source said Nissan is considering offers from companies inside the automotive field and from private equity firms. He described the process as being in the early stages.

The Japanese media have reported that the bidders include Kohlberg Kravis Roberts and Bain Capital of the U.S. and MBK Partners of Asia. Reports said Nissan has winnowed down suitors through a first round of bids and aims to finalize a buyer by year end.

Nissan accounts for about 80 percent of Calsonic Kansei's global sales, estimated at $10.32 billion in the most recent fiscal year. The company ranks No. 20 on Automotive News' list of the world's 100 largest original-equipment automotive parts suppliers.

Nissan accounts for about 80 percent of the supplier's global sales. The companies' tight ties are a lingering remnant of Japan's keiretsu system.

But Calsonic's tight ties to Nissan are a lingering remnant of the keiretsu system of cozy cross-holdings that long bonded Japanese automakers and suppliers together into corporate groups.

When Carlos Ghosn, now Nissan CEO, arrived in 1999 as the company teetered on bankruptcy, one of his first acts was to begin dismantling its keiretsu system and shifting toward a more Western system of competitive bidding. Ghosn shocked many in Japan by selling Nissan-affiliated suppliers.

However, 17 years later, Calsonic Kansei remains financially tied to Nissan. Calsonic CEO Hiroshi Moriya, now 59, joined the supplier in 2007 after years of working in purchasing at Nissan.

In an interview last year, Moriya said diversifying Calsonic Kansei's customer base away from Nissan was a top priority. But even then, his goals were modest. Moriya offered a target of expanding sales to other companies so that Nissan's share of total sales would dip to just 70 percent.

Moriya conceded that Nissan was looking increasingly at rivals that might be cheaper or have a bigger global footprint.

"It is very difficult to get Nissan's business," Moriya said at the time. "We have to be more competitive."

Analysts say Nissan wants to end the close relationship.

"They want to treat Calsonic Kansei the same as any other supplier," said Christopher Richter, a senior auto analyst at CLSA Asia-Pacific Markets. "There is not much in Calsonic Kansei that helps Nissan grow. So why do you want to own so much of it? There are more value-added things to invest in."

In product offerings, Calsonic Kansei wants to leverage overlap potential better among its six units: compressors, interiors, electronics, heat exchange, climate control and exhaust systems.

But a big question is how Calsonic Kansei might decouple from Nissan if its biggest shareholder divests. If Calsonic Kansei's new shareholders are private equity firms, the supplier could face seeing its business units carved up and sold off.

Calsonic Kansei's operations are so intimately intertwined with Nissan's that, in some cases, it has installed is own production lines as sublines inside Nissan plants to speed delivery.

Word of Nissan's interest in selling Calsonic Kansei comes amid reports that Nissan also is looking to sell its share of a battery-producing joint venture with Japan's NEC Corp.

Nissan wants to sell its 51 percent holding in Automotive Energy Supply Corp. to have greater freedom to source less costly batteries from a variety of rival makers, Japan's Nikkei reported last month. NEC holds the remaining 49 percent.

Nissan and NEC founded AESC in 2007 to make lithium ion batteries for the Nissan Leaf electric vehicle and hybrid cars.