View Full Version : Mitsubishi maybe in trouble again...

01-19-2005, 08:48 PM
<B>Decline in Sales Sends Mitsubishi Motors on a Search for Financing<p>By TODD ZAUN </B><p>Published: January 20, 2005 (tomorrow's news today <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/beigesmilewinkgrin.gif" BORDER="0"> )<p>TOKYO, Jan. 18 - Less than a year after the Mitsubishi Motors Corporation narrowly averted crisis by securing a $4.6 billion bailout from the Mitsubishi Group, the carmaker is again reaching for a lifeline amid a devastating decline in sales.<p>Mitsubishi Motors is scrambling to secure new cash and to outline a strategy for reversing the huge losses it has incurred after a series of management missteps in the last several years. Analysts say Mitsubishi is burning through cash so quickly that its need for money has become critical. Many of them also say they doubt that new money will be enough to enable the company to turn itself around.<p>"If they are to finance any new models and build a turnaround, then there clearly is a need for new money," said Clive Wiggins, an auto analyst for Lehman Brothers in Tokyo. "Mitsubishi has had chances, it's done a lot of restructuring in the past, but it hasn't taken advantage of those chances, and that's why the company is struggling today." <p>Companies in the Mitsubishi Group, which includes the trading company Mitsubishi Corporation and the banking giant Mitsubishi Tokyo Financial Group, are planning to invest as much as 300 billion yen ($2.9 billion) in Mitsubishi Motors. Their moves are part of a new bailout plan the company is trying to assemble by the end of this month, according to Japanese news reports Wednesday.<p>Mitsubishi Motors is also continuing to seek investment from another automaker, though analysts say the chances the company will succeed in landing a significant investment are increasingly slim because of its deteriorating finances.<p>Mitsubishi Motors said in a statement Wednesday that it was "evaluating details regarding business tie-ups, joint cooperation strategies and financial measures, including increases in capital," although it added "no final decision has been made."<p>Spokesmen for the Mitsubishi Corporation and Mitsubishi Tokyo bank declined to comment on whether the companies were considering additional investments in the carmaker, though both said they remained committed to it.<p>The automaker has had a series of failures in recent years, including a misguided effort to foster sales in the United States by offering easy loans to customers with weak credit and a recall scandal in Japan that led to the arrest of half a dozen former Mitsubishi executives, including a past president. <p>The company was forced to seek a bailout from the Mitsubishi Group after its top shareholder, DaimlerChrysler, unexpectedly cut off its support last year. <p>The Daimler executives who had been running Mitsubishi since 2000 retreated to Stuttgart, leaving a hastily assembled team of executives from throughout the Mitsubishi empire to salvage the automaker. Mitsubishi announced plans in May to close a factory in Japan and eliminate thousands of jobs in a cost-cutting drive that its new chief executive, Yoichiro Okazaki, called its "last chance for survival." <p>In the United States, the company tightened its lending policies, even though it lost sales as a result, and offered a 10-year, 100,000-mile powertrain warranty, in an attempt to win over car buyers with something other than easy credit. <p>Despite these efforts, Mitsubishi Motors' problems have gone from bad to worse. In Japan, its sales plunged 30 percent, to 237,000 vehicles for the period from January through November last year as car buyers turned to other brands. In the United States, Mitsubishi's sales sank 37 percent last year to 161,000 cars and trucks, less than half its peak of 345,000 vehicles in 2002. <p>This month, the head of its American operation, Finbarr O'Neill, announced he was leaving. Mr. O'Neill was credited with rapidly expanding the sales of Hyundai Motor in the United States before joining Mitsubishi, and his departure dashed hopes of a repeat performance there. <p>All of the troubles are quickly turning Mitsubishi into an also-ran among Japan's fast-growing carmakers. A decade ago, Mitsubishi was vying with Honda for third place among Japanese brands, behind the top sellers, Toyota and Nissan. Today, Mitsubishi has fallen behind Mazda and Subaru to sixth place among Japanese car companies. <p>The problems have also been extremely costly. In November, Mitsubishi Motors reported its net loss for the six months ended Sept. 30 widened to 146.2 billion yen ($1.3 billion at the time), from a loss of 80.2 billion yen, or $724 million, in the period a year earlier.<p>To get out of the slump, Mitsubishi Motors has been looking for another carmaker willing to invest in it in exchange for some of its technology. Since last year, Mitsubishi Motors and Nissan have been trying to reach a deal for Nissan to buy part of Mitsubishi's Japanese minicar operation, which is seen as the most valuable part of its business.<p>Those negotiations hit a wall when Mitsubishi Motors refused to give Nissan executives a significant role in running the minicar operation, according to someone close to the talks who insisted on not being identified for fear of angering colleagues involved in the talks.<p>Minicars are a special category of very small vehicles that qualify for lower tax rates because of their small engines. Nissan does not make minis itself, but is interested in getting into the business as the small cars account for a third of all Japanese car sales. <p>The two companies announced this week that Mitsubishi Motors would supply 36,000 more miniature vehicles to Nissan this year to sell under the Nissan brand; Mitsubishi already supplies Nissan with 20,000 minicars a year. But analysts said the deal was disappointing because of the small number of vehicles involved and, more notably, because it did not include any investment from Nissan.<p>The deal "will help, but it's not significant enough to turn around Mitsubishi Motors' business," said Takaki Nakanishi, an auto analyst at UBS Securities in Tokyo. "Mitsubishi has to find its way based on a recovery of its own brand." <p>To rebuild its brand the company is counting first on two new vehicles it introduced at the auto show in Detroit this month: a pickup truck called the Raider and a redesigned Eclipse sports car. <p>But they will have to go up against a horde of models in those segments from competitors with far deeper marketing and advertising pockets. Mitsubishi's troubles are far from over, analysts say. <p>"I'm not sure what it will take to decisively turn Mitsubishi back on the path to sustainable recovery and global competitiveness in the automobile industry, and that's the big problem," said Mr. Wiggins of Lehman. "There are no easy solutions."<p>New York Times - <A HREF="http://www.nytimes.com/2005/01/20/business/20mitsubishi.html" TARGET="_blank">http://www.nytimes.com/2005/01....html</A>