By Maki Shiraki and Nobuhiro Kubo
TOKYO (Reuters) - As Mitsubishi Motors acknowledged publicly last month that it cheated on fuel economy tests - its third scandal in two decades - its chief, Osamu Masuko, quietly called in on his counterpart at partner Nissan Motor's headquarters.
Masuko, several Mitsubishi group executives said, gave Carlos Ghosn his blunt assessment: even after a decade of change, he had failed to penetrate his firm's insular technology arm. Now, it was at the heart of his problems.
That meeting in Yokohama - uncharacteristically frank in corporate Japan - helped clinch Mitsubishi Motors' future, the company insiders said, paving the way for Nissan to swoop in and take control.
It also cemented an alliance between the two men that will be critical to the overhaul of Japan's sixth-biggest carmaker, a deal set to be officially signed on Wednesday. Ghosn and Masuko had until then worked together for the best part of five years, on a Japanese micro-car venture.
"We trust him," Ghosn said of Masuko at a briefing for analysts on the day of the deal earlier this month. "We think he's an honest guy and he is not cheating or hiding. This is an important element in a transaction like this."
Company executives said Ghosn's trust means he can work with the straight-talking Masuko as he did with Nissan's then-chairman Yoshikazu Hanawa almost two decades ago.
"Masuko was brutally open. He admitted to the need to reform Mitsubishi's tech arm," one Mitsubishi Group executive said.
Masuko told Ghosn that the tech department, based 250 km (155 miles) from the firm's Tokyo headquarters, was "secretive" - even after the department came under fire a decade earlier for covering up defects. He said he needed help there.
"Mr. Masuko recognized this as a problem," said another of the executives. "The fact that he says such things frankly is what makes Ghosn like him."
A FRIEND IN NEED
For sure, as much as Masuko needs Nissan's help to reform his tech unit - which was partly behind the Zero World War II fighter plane - Ghosn needs Masuko, who has built a successful business in Southeast Asia, a region where Nissan has underperformed.
The challenge for Ghosn is to find long-serving Mitsubishi Motors insiders whom he can trust to advise him and guide him around the company.
Masuko is something of an outsider as he was parachuted in from Mitsubishi Corp, a trading company, in the mid-2000s to help restructure the automaker after it was rescued from near-bankruptcy in the wake of the last scandal.
Mitsubishi Motors veterans say the 67-year-old - who has worked in South Korea and Indonesia - has run the company with an outsider's perspective, shutting down big U.S. manufacturing facilities. Results have improved and the carmaker has built up a $4 billion cash pile.
Ghosn faced a similar challenge just over a decade and a half ago when, as Renault's senior executive, he was sent to Tokyo to restructure a near-bankrupt Nissan. His collaboration with Hanawa then was critical to turning Nissan around.
Even if he leaves once the deal completes, as he has hinted, Masuko will be as key now to Ghosn in trying to fix the corporate culture at a firm mired in a third scandal in two decades.
Like Hanawa at Nissan, Masuko was aware of his company's predicament, and called for "radical, fundamental reform" when he first appeared - albeit three weeks after the fuel economy cheating scandal broke.
"At the end of the day, this (deal) was done quickly because there was trust at the top level," Ghosn said at a briefing with Masuko to announce the planned partnership.
(Reporting by Maki Shraki and Norihiko Shirouzu, with additional reporting by Taiga Uranaka, Taro Fuse, Nobuhiro Kubo, Minami Funakoshi and Gilles Guillaume; Editing by Clara Ferreira-Marques and Ian Geoghegan)