Mitsubishi Motors Seen Beating First Half Forecast

TOKYO, Nov 12 Reuters reports that Mitsubishi Motors Corp, boosted by cost cutting and a weaker yen, is expected to beat its own forecast when it announces first-half earnings this week but the restructuring automaker will stay deep in the red, analysts said.

It went on to report that five analysts polled by Reuters last week produced an average forecast for a consolidated net loss of 38.9 billion yen ($324 million) for the six months through September.

Mitsubishi's own forecast, made in May, was for a loss of 50 billion yen, compared with a loss of 75.6 billion a year earlier.

Japan's fourth biggest automaker, 37 percent owned by DaimlerChrysler AG aims to break for the full year to March 31 after a recall scandal resulted in its worst ever net loss of 278.14 billion yen ($2.31 billion) in 2000/01.

Quicker than expected results from aggressive cost-cutting and favourable currency rates were expected to help overcome sluggish first-half sales and keep alive the hope of meeting the break-even target for the year, but it will be tough going.

``Mitsubishi's sales, particularly its domestic sales, have not been reaching their forecasts,'' said Hideaki Aonuma, auto analyst at Tokyo-Mitsubishi Securities.

``But the cost-cutting efforts seems to be exceeding their plans with room to spare, and the exchange rate has helped them.''

Mitsubishi's domestic sales, excluding minivehicles, plunged 18.3 percent in calendar 2001 to October following the company's recall of 1.52 million cars worldwide after it admitted last July to hiding defects and customer complaints for two decades.

The company has also been hampered by a lack of new models as it focuses its energies on its restructuring programme.

But chief operating officer Rolf Eckrodt, brought in by DaimlerChrysler to help turn around the struggling company, said last month it was ahead of schedule in its cost cutting and that results for the first half would be ``better than expected''.

The five analysts surveyed produced an average forecast of a 31.1 billion yen loss on a group recurring basis, better than the company's forecast of a loss of 50 billion yen.

DIFFICULT ENVIRONMENT

Eckrodt also said last month that Mitsubishi was still on track to break even in the business year to next March despite the effects of the September attacks in the United States.

Some analysts think cost cutting and a favourable exchange rate will continue to support Mitsubishi in the second half, but others say it will be hard to hit full-year targets.

``Certainly it's going to be difficult in the second half because we've got a markedly more difficult environment, not just the U.S., but Japan as well,'' said Clive Wiggins, auto industry analyst at Commerzbank Securities.

Mitsubishi has said it aims to limit the impact of the September attacks on its U.S. vehicle sales through zero-interest financing incentives and other measures.

Sales rose 13 percent year-on-year in October.

For calendar 2001 to October, U.S. sales were down 2.3 percent from a year earlier.

While such incentives can be sweet deals for consumers and boost volume over the short term, they are very expensive for automakers and can wind up merely sabotaging future sales.

RESTRUCTURING LAGGARD?

Even if Mitsubishi can weather the gloomy outlook for the domestic and U.S. markets in 2001/02, it is still lagging other restructuring Japanese automakers Nissan Motor Co and Mazda Motor Corp in its revitalisation efforts.

Nissan announced detailed preliminary first-half results last month that forecast a record group operating profit of 187 billion yen ($1.55 billion) for the six months to September.

Mazda, which will report first-half results later on Monday, last month gave a revised forecast for group net earnings of one billion yen for the six months through September, a huge leap from a May forecast of a loss of 9.5 billion yen and an actual loss of 9.6 billion yen a year earlier.

Japan's two healthiest automakers, Toyota Motor Corp and Honda Motor Co , have already reported record group net profit figures for the first-half.

($1 equals 120.04 yen)