Mitsubishi Motors to Cut Production at Plant in Illinois, but Won't Decide How Much Until Fall

TOKYO July 19, 2004; Audrey Mcavoy writinfg for the AP reported that Mitsubishi Motors Corp. will cut production at its U.S. plant in Illinois, but won't decide by how much until September, a company spokesman said Monday.

The automaker, which has suffered a plunge in Japanese sales amid a cover-up scandal and a spate of recalls, announced a restructuring plan in May to cut 10,900 jobs over three years, close a car plant in Japan and receive a cash injection of 450 billion yen ($4 billion) from several investors.

In the United States, Mitsubishi's sales fell 27 percent in the six months through June, in part because it was forced to tighten its criteria for making loans. Mitsubishi Motors had been offering zero-percent financing and allowing borrowers to defer payments to boost sales, but this strategy backfired when many borrowers defaulted on their payments.

A review of the automaker's plant in Normal, Illinois is continuing, a company spokesman said on condition of anonymity.

The plant, with about 3,100 employees, has the capacity to produce 180,000 cars a year. It made 156,800 vehicles in the fiscal year that ended in March.

The plant produces the Galant, Eclipse and Endeavor for Mitsubishi and, until 2005, the Dodge Stratus and Chrysler Sebring.

The reputation of Mitsubishi Motors already was tarnished by a recall cover-up scandal spanning decades that emerged in 2000. But in recent months, it admitted it continued to hide defects in recent years and announced recall after recall, affecting some 370,000 vehicles and most of its models in Japan.

Its truck affiliate, spun off last year, is recalling 450,000 trucks and buses for dozens of defects it had concealed for years.

In April, U.S.-German partner DaimlerChrysler AG, which owned 37 percent stake in Mitsubishi Motors, said it was no longer willing to pump cash into the Tokyo-based automaker.

DaimlerChrysler's stake in the automaker has since dropped to 25 percent after Mitsubishi issued new shares to other investors to raise cash.