Mitsubishi Turns Around Makes Profit

TOKYO AP reported that the Mitsubishi Motors Corp.returned to profitability in the latest fiscal year under a turnaround plan with German partner DaimlerChrysler AG but executives said the Japanese automaker still faced a challenge in repairing its battered corporate image.

Mitsubishi Motors posted a net group profit of 11.3 billion yen ($89 million) Monday for the fiscal year ended in March -- its first net profit in three years -- largely on cost reduction efforts with DaimlerChrysler, which owns 37.3 percent of Japan's No. 4 automaker. Mitsubishi Motors lost 278 billion yen the previous fiscal year.

"It's only a milestone in the three-year turnaround plan," said Rolf Eckrodt, the chief operating officer sent in by DaimlerChrysler. "The domestic market remains our major challenge."

Eckrodt, set to become chief executive next month, said his company was doing better than expected in some areas and was pinning hopes on a gradual recovery in sales, driven by growth in North America.

Recovery in sales remained slow in Japan, where the company's image was seriously battered by massive recalls that followed the summer of 2000, when it acknowledged a cover-up of auto defects lasting more than two decades.

Sales for fiscal 2001 totaled 3.20 trillion yen ($25 billion), inching down 2 percent from 3.28 trillion yen a year ago.

Mitsubishi Motors sold 1.41 million vehicles in fiscal 2001, down from 1.44 million a year ago. Overseas sales held steady, but sales in Japan fell about 8 percent from 507,000 to 468,000.

Eckrodt refused to disclose details about model plans but said a compact that will take advantage of design collaboration with the Daimler unit will go on sale in Japan in November.

Mitsubishi Motors has been trying to strengthen quality control and accountability in the corporate ranks with help from DaimlerChrysler but has continued to stumble, taking a 3.9 billion yen ($31 million) charge for recalls in fiscal 2001 -- including paying for inspections of truck tires suspected of coming loose. Recalls cost the automaker 50.7 billion yen the previous year.

Mitsubishi has been steadily reducing jobs, trimming about 12 percent of its global work force from 73,100 workers in 2000 to about 64,000.

Mitsubishi Motors, which closed a car assembly line at a plant in Japan during the past year, took a 14.9 billion yen ($117 million) charge for early retirement expenses for nearly 1,400 people in fiscal 2001.

The automaker also saved 137 billion yen ($1.1 billion) by cutting costs. It reduced debt to 1.3 trillion yen ($10 billion) from nearly 1.8 trillion yen in fiscal 1998.

While acknowledging the battle was far from over, Mitsubishi Motors officials said they had hopes for the growing impact of the DaimlerChrysler alliance in new models.

"We believe we have taken our first step," Mitsubishi Motors President Takashi Sonobe told reporters.

For fiscal 2002, Mitsubishi Motors is forecasting profit of 38 billion yen ($298 million) on sales of 3.4 trillion yen ($27 billion).