Mitsubishi Motors to Get $4b in Funding From Mitsubishi Group and Other Investors

TOKYO May 20, 2004; Yuri Kageyama writing for the AP reported that ailing Japanese automaker Mitsubishi Motors Corp. will receive 450 billion yen ($4 billion) in funding from the Mitsubishi group and other investors as it struggles to hammer out a revival plan without additional money from German partner DaimlerChrysler AG.

Under a plan scheduled to be announced Friday, Mitsubishi Motors will keep its U.S. plant in Normal, Illinois, open and will target an overall sales increase over the next three years, a source familiar with the plan said on condition of anonymity.

The plan will also include job cuts, but where they will be made isn't yet decided except for small reductions in Tokyo headquarters, the source said, without elaborating.

Mitsubishi Motors, which employs 44,000 people in Japan, the United States, Europe and Australia, declined to comment on the plan.

The automaker, which is burdened with a multibillion dollar debt, plunging car sales and a spate of recalls, was dealt a serious blow by the surprise announcement last month by the U.S.-German automaker DaimlerChrysler, which owns 37 percent of the automaker, that it would not provide a fresh cash infusion.

But the Mitsubishi conglomerate has promised to stand behind the automaker. The group includes Mitsubishi Heavy Industries, which owns 15 percent of the automaker, trading company Mitsubishi Corp., 5 percent, and Bank of Tokyo-Mitsubishi, 3 percent.

The Nihon Keizai Shimbun, Japan's top business daily, said the company will reduce its global work force by about 10 percent.

Mitsubishi Motors is saddled with more than 1 trillion yen ($9 billion) in debt, plunging car sales in Japan and North America and a badly tarnished image over a defect scandal followed by a spate of recalls four years ago.

It is expecting to report deep losses Friday for the fiscal year ended March 31, a reversal from a 37 billion yen profit the previous year, mainly because of massive losses from buyers with bad credit in North America.

The biggest problem is its loss of credibility with Japanese drivers.

Mitsubishi Motors is under criminal investigation for allegedly concealing product defects. On Thursday, Mitsubishi Fuso Truck & Bus Corp., which was spun off from the automaker, acknowledged there was likely a cover-up in their ranks in announcing a recall for 180,000 trucks for a clutch defect.

That follows a massive recall of trucks for a wheel defect two months ago, which is under investigation in a 2002 death of a pedestrian. The company also admitted to a systematic defect cover-up in a massive recall of passenger cars in 2000.

Analysts say Mitsubishi Motors faces a struggle to turn around its operations to assure consumers about the quality of their vehicles. The company has repeatedly said it has installed quality-control methods from DaimlerChrysler but the recalls have not stopped.

And it's likely to have a hard time ending eroding sales, said Tsuyoshi Mochimaru, an analyst at Daiwa Institute of Research.

"The company can't boost sales without new models," he said.

Rolf Eckrodt, sent to Mitsubishi Motors by DaimlerChrysler in 2001, resigned as chief executive and president shortly after the DaimlerChrysler decision. He was replaced by Yoichiro Okazaki, formerly a director at Mitsubishi Heavy Industries.