Mitsubishi Motors to Cut 11,000 Jobs, Nearly a Quarter of Global Work Force Under Revival Plan

TOKYO May 21, 2004; Yuri Kageyama writing for the AP reported that Mitsubishi Motors Corp. will cut 11,000 jobs, nearly a quarter of its global work force, and get a $4 billion infusion from its parent and other investors under a revival plan its chief executive described as its "last chance."

The Japanese automaker is racking up deep losses and debt amid plunging sales as it struggles to restore its credibility after recurring recall cover-ups.

The Tokyo-based automaker was dealt an additional blow when it suffered what one executive dubbed "the Daimler shock" when U.S.-German automaker DaimlerChrysler AG decided last month against offering more money for a turnaround.

The company faces a tough fight, analysts said.

"The announced plan is so-so, perhaps better than so-so," said Koji Endo, analyst with Credit Suisse First Boston in Tokyo, adding that the closing of Japanese manufacturing plant was a pleasant surprise. "I still have some doubts whether the company can achieve its profit targets."

Mitsubishi Motors said Friday that its losses in the latest fiscal year, which ended March 31, came to 215 billion yen ($1.9 billion). That is a reversal from a 37 billion yen profit the previous year and nearly triple its forecast in February. Sales fell 35 percent to 2.5 trillion yen ($22 billion).

For the current fiscal year, the company forecast a 230 billion yen ($2 billion) loss on 2.25 trillion yen ($20 billion) in sales and acknowledged it couldn't hope to return to profitability until fiscal 2005.

Under the plan, Mitsubishi Motors will keep open its U.S. plant in Normal, Ill., but shutter an engine plant in Australia and a car plant in Okazaki, Japan.

The proposed job cuts will reduce the company global work force from 49,100 to 38,200 by April 2007. Mitsubishi, which employs workers in factories and offices in Japan, the United States, Europe and Australia, did not give a regional breakdown of the job cuts.

Once the plan is completed, DaimlerChrysler's stake in Mitsubishi Motors will be reduced from 37 percent to 22 percent or 23 percent, but alliance projects will continue, such as the joint development of small cars and engines, officials said.

The top shareholder at about 40 percent will become investment fund Phoenix Capital, which is affiliated with the Mitsubishi group. The Mitsubishi conglomerate, which includes Mitsubishi Heavy Industries, trading company Mitsubishi Corp. and Bank of Tokyo-Mitsubishi, is contributing money to the revival plan. J.P. Morgan Securities is also injecting some cash.

The plan also calls for boosting global vehicle sales, now at 1.5 million units, down 1 percent from the previous year, to 1.7 million by fiscal 2006, counting largely on growth in China and focusing on sporty cars as its niche market.

But Mitsubishi Motors' biggest problem is growing consumer doubts about quality. It is now under criminal investigation in Japan for possible defect cover-ups.

On Thursday, Mitsubishi Fuso Truck & Bus Corp., which was spun off from the automaker, acknowledged that defects in clutches and other parts had probably been concealed and announced a recall of 180,000 trucks. Those defects are suspected in an October 2002 fatal accident in which the driver crashed and got thrown out of a Mitsubishi truck.

A separate wheel defect is under investigation in the January 2002 death of a pedestrian, who was crushed by a wheel that rolled off a Mitsubishi truck. After years of denial, the truck unit acknowledged a design defect that resulted in more than 240,000 vehicles being recalled this year.

The truck cover-ups followed an earlier scandal when Mitsubishi Motors admitted to systematic defect cover-ups spanning decades in a massive recall of cars in 2000.

Standing before a packed room of reporters at company headquarters, chief executive Yoichiro Okazaki bowed deeply and apologized to the families of the two people who had died in the accidents.

"This is our last chance to continue as an automaker," he said.

Also Friday, Mitsubishi Motors appointed Hideyasu Tagaya, who has experience with North American operations in the 1970s and 1980s, as chief operating officer and president, subject to shareholders' approval in June.

The company also promised to include outsiders in a panel overseeing corporate ethics to ensure car quality and safety to win back customer trust.

The revival plan and financial results were released after the market closed. Shares of Mitsubishi Motors rose ended the day at 240 yen ($2), up nearly 3 percent on the Tokyo Stock Exchange shortly

Yasuaki Iwamoto, analyst with Okasan Securities Co. in Tokyo, said Mitsubishi Motors, which has announced several turnaround plans over the last few years, needs more than just goals.

"It's a question of how well it can actually carry out the plan," he said.