Mitsubishi Reviewing Daimler Alliance

TOKYO August 26, 2004; Audrey McAvoy writing for the AP reported that Japan's Mitsubishi Motors Corp. is reviewing its alliance with DaimlerChrysler, including cooperation in manufacturing mid-sized sedans, the company said Thursday.

DaimlerChrysler decided in April against investing more cash in Mitsubishi Motors to support the Japanese automaker's restructuring plan.

The German-American company's stake in Mitsubishi has since shrunk to about 20 percent from 37 percent. Mitsubishi has issued new shares to the Mitsubishi group of companies and other investors to raise cash.

Mitsubishi Motors said in a brief statement Thursday it would continue to cooperate with DaimlerChrysler in areas that benefited both.

"We will maintain projects that have merits to both sides," Mitsubishi Motors said. "Regarding mid-sized sedans, we are considering a number of options regarding our alliance with DaimlerChrysler."

The company did not elaborate.

In Stuttgart, Germany, DaimlerChrysler spokesman Jochen Schaefers said that "the joint projects will continue as planned" under long-term contracts.

But the Nihon Keizai Shimbun, Japan's biggest financial newspaper, reported Thursday that Mitsubishi and DaimlerChrysler would halt plans to use a common platform for their mid-sized sedans.

Instead of using a platform DaimlerChrysler developed, Mitsubishi Motors aims to continue using its existing platform, the newspaper said.

Mitsubishi also said it was currently negotiating with DaimlerChrysler on how much of a stake it will hold in their Dutch joint venture, Netherlands Car BV.

The Nihon Keizai reported the two companies would scrap their original plan to make NedCar, which manufactures small vehicles under the Mitsubishi and DaimlerChrysler brands, a 50-50 joint venture by July.

Mitsubishi wanted DaimlerChrysler to take a majority stake in NedCar because production in the Netherlands has been led by the German car giant, the newspaper said.

Mitsubishi's problems have deepened in recent months after the automaker acknowledged it had hidden auto defects and launched recalls for thousands of cars and trucks. Its vehicle sales in Japan sank 38 percent in April-June, while sales in North America tumbled by a third from the same period a year ago.

On Thursday, Mitsubishi Motors announced it would accelerate plans to repair defects in cars it recalled, saying it would temporarily hire dozens of workers from affiliated companies to finish 90 percent of the repairs by December. The move came as the auto maker wrapped up an internal probe into the cover-up scandal without finding any new defects.

The carmaker had a similar scandal four years ago, when it admitted to a systematic cover-up of defects spanning decades.

At the Tokyo Stock Exchange Thursday, Mitsubishi Motors' shares fell 5.9 percent to 96 yen (87 cents).