Mitsubishi Motors Seeks 500 Bln Yen for 2nd Bailout

Jan. 19, 2005; Bloomberg reported that Mitsubishi Motors Corp., Japan's fifth- largest carmaker, will ask other Mitsubishi group companies and banks for at least 500 billion yen ($4.9 billion) to bail out the company for the second time in nine months, four executives familiar with the plan said.

Mitsubishi Motors plans to sell at least 200 billion yen of preferred shares and subordinated bonds to three Mitsubishi companies, said the executives, who declined to be named. Another 50 billion yen would come from state-owned Development Bank of Japan and the rest from units of Mitsubishi Tokyo Financial Inc. that would provide credit and swap debt for equity.

``We are not optimistic about Mitsubishi Motors' future,'' said Fumiyuki Nakanishi, a Tokyo-based equity strategist at SMBC Friend Securities Co., which doesn't disclose its holdings. ``It's clear the company's financial condition is still severe.''

Japan's only unprofitable carmaker, which received a 496 billion yen rescue package from stakeholders in May, needs more money to pay debts that totaled 1.14 trillion yen at the end of last year. The Tokyo-based producer of Colt compact cars and Pajero sport-utility vehicles also needs to develop new models after selling fewer of its vehicles in Japan every month throughout 2004.

``Nothing concrete has been decided for the plan and we have no announcement at this point,'' Mitsubishi Corp. spokesman Hidenori Myoshin said in Tokyo today.

Mitsubishi's board will meet in Tokyo to consider the plan on Jan. 27, the executives said. The company's shares -- down 35 percent since the last bailout -- fell 6.1 percent to 153 yen in Tokyo trading today, dropping for the first day in five.

Mitsubishi Group

``We're currently considering measures including forming alliances and boosting capital to stabilize our business and improve our finance in the mid to long term,'' the carmaker said in a statement to the Tokyo Stock Exchange today.

Mitsubishi Motors will receive 250 billion yen from Mitsubishi Corp., Mitsubishi Heavy Industries Ltd. and Mitsubishi Tokyo Financial Group Inc., the Nihon Keizai newspaper reported today, without saying where it got the information.

DaimlerChrysler AG, the world's fifth-largest automaker, owns about a fifth of Mitsubishi Motors. The Stuttgart, Germany-based company in April last year declined to invest any more money in Mitsubishi Motors.

Masuyo Yuri, spokeswoman at DaimlerChrysler Japan Holding Ltd., declined to comment.

Mitsubishi Motors said in 2000 that it covered up customer complaints about defects, prompting a global recall of as many as 2 million cars, one of the largest in the automotive industry. The recall sparked concerns about vehicle quality and deterred customers from buying the company's cars.

Damaged Image

The automaker's brand image was further damaged last year when its Mitsubishi Fuso Truck & Bus Corp. affiliate also said it covered up defects, including faults linked to two fatal accidents in 2002. Mitsubishi Motors had to recall more than 200,000 vehicles in Japan last year to fix defects ranging from faulty brakes to windscreen wipers.

Mitsubishi Motors is part of the Mitsubishi group of companies, one of Japan's largest and oldest conglomerates, with businesses from banking to making aircraft and missile parts and real estate.

The carmaker is 2.8 percent owned by Mitsubishi Corp., Japan's largest trading company, 7.9 percent owned by the country's largest machines maker Mitsubishi Heavy and 1.5 percent owned by the Bank of Tokyo Mitsubishi Co.

Shinji Munekuni, spokesman of Bank of Tokyo Mitsubishi, a unit of Tokyo Mitsubishi Financial, couldn't be reached for comment. Toni Melfi, DaimlerChrysler AG's spokesman in New Jersey, also couldn't be reached.