TOKYO—Nissan Motor Co. on Thursday completed its purchase of a controlling stake in scandal-hit Mitsubishi Motors Corp. for more than $2 billion, a deal aimed at boosting scale to take on the world's top auto makers.

With the addition of Mitsubishi, the 17-year-old alliance between Nissan and Renault SA produces around 10 million vehicles a year, making it one of the three largest automotive groups in the world, behind Toyota Motor Corp. and Volkswagen AG, said Carlos Ghosn, chief executive of both Renault SA and Nissan.

"The alliance will have a scale advantage over most car makers and a handicap to none," said Mr. Ghosn, who is taking the chairman's role at Mitsubishi and dispatching a top lieutenant as Mitsubishi's chief operating officer.

Nissan announced the deal for Mitsubishi in May. After completing due diligence and receiving regulatory approval, it paid ¥ 237 billion ($2.3 billion) on Thursday and formally took a 34% controlling stake.

The Renault-Nissan Alliance is the most prominent example of car makers teaming up to cut costs, allowing them to operate at the scale of much larger car makers. The success of the alliance has spurred other car makers to seek out tie-ups.

Toyota is in talks with Suzuki Motor Corp. to jointly shoulder the cost of developing new self-driving and electric vehicles to fend off Silicon Valley upstarts and meet increasingly stringent environmental regulations. Toyota President Akio Toyoda said he hoped the tie-up would lead to more partnerships.

Nissan and Mitsubishi plan to swap technological know-how, including Nissan's self-driving technology and Mitsubishi's gas-electric hybrid system, and cut costs by collaborating on sourcing raw materials. Nissan also hopes to leverage Mitsubishi's comparative strength in trucks and sport-utility vehicles, particularly in the U.S., where falling gas prices have led to a boom in sales of these vehicles.

But the deal also could saddle the alliance with a long turnaround project. Mitsubishi admitted in April that employees falsified fuel-economy data, leading to plunging sales and an expected loss of more than $2 billion in the year ending March 2017.

As chairman at Mitsubishi, Mr. Ghosn will be one of four Nissan-nominated members on the board. Nissan's current chief performance officer, Trevor Mann, will become chief operating officer at Mitsubishi, while another executive dispatched from Nissan will run Mitsubishi's research and development.

"We are going to show that Mitsubishi Motors has more potential than has been shown so far," Mr. Ghosn said.

Mitsubishi President and Chief Executive Osamu Masuko will keep those roles for a transitional period but said he plans to hand over the reins eventually. He said he wanted to resign to take responsibility for the fuel-economy scandal but stayed at Mr. Ghosn's request "for the good of the company."

To ensure he can devote enough time to Mitsubishi, the 62-year-old Mr. Ghosn tapped Nissan's chief competitive officer, Hiroto Saikawa, to act as Nissan's co-chief executive.

Mr. Ghosn has a history of successful turnarounds at car companies, having transformed Nissan from a struggling company in 1999 to a steadily profitable global player today. At Nissan, he solidified his reputation as a cost-cutter by shutting down unproductive factories and breaking up its close-knit supplier network.

The Nissan-Mitsubishi deal is causing concern in Okayama prefecture in western Japan, which plays host to a Mitsubishi factory. Suppliers there were hit hard when the factory temporarily shut down after the fuel-economy scandal. The governor of the prefecture recently met Mr. Ghosn and asked him to incorporate the suppliers into Nissan's network, said Yuji Yokota, a prefecture official.

Mr. Ghosn said Thursday the suppliers would get more opportunities if they meet Renault-Nissan's stringent price requirements. "It's good news for the competitive suppliers and bad news for the less competitive suppliers who don't want to work on becoming more competitive," he said.

Chieko Tsuneoka contributed to this article.

(END) Dow Jones Newswires

October 20, 2016 08:35 ET (12:35 GMT)