ITOCHU Corporation (TSE:8001) and a domestic corporate reconstruction fund, J-Will Partners Co., Ltd. (JWP), are making final arrangements to acquire embattled used-car giant BigMotor Co., Ltd., Nikkei learned on February 21, 2024. Plans call for splitting Bigmotor -- which is embroiled in a scandal involving fraudulent insurance claims -- into two businesses, with the newly created company taking over major operations such as used-car sales and maintenance. Bigmotor came under fire last year after overcharging customers for repairs in order to inflate insurance claims. Its fraudulent practices included deliberately damaging customer vehicles and then filing claims with insurance companies.

Business deteriorated after the scandal came to light, with used-car sales at one point dropping more than 60% from previous years. After banks refused to refinance the company's loans, President Shinji Izumi and other management gave up on rebuilding Bigmotor themselves and began seeking external support. A deal is to be signed in March, with the reorganized structure launching in April.

Bigmotor's founding family will not be involved in managing the new company. JWP will invest the majority in a new joint venture with Itochu and others to acquire the new company. A name change from Bigmotor is being considered, and arrangements are progressing quickly for a new management team whose tasks will include establishing a system to prevent scandals from recurring and striving to restore customer trust.

The existing company will focus on dealing with a series of nationwide lawsuits and repaying debts. The founding family will contribute about JPY 10 billion ($66.7 million) to address the fraud issue. Itochu, fuel trading subsidiary Itochu Enex and JWP reached a basic agreement with Bigmotor in November to conduct an exclusive due diligence process.