Daimler Says Mitsubishi to Pay Compensation for Fuso

Feb. 8, 2005; Jeremy Van Loon writing for Bloomberg reported that DaimlerChrysler AG, the world's largest truckmaker, settled a dispute with partner Mitsubishi Motors Corp. and will receive its 20 percent stake in the Fuso division and cash to compensate for hidden defects in trucks.

The two companies signed a letter of intent and expect a final agreement in March, DaimlerChrysler said today in a statement to the Frankfurt Exchange. The German company will own 85 percent of Mitsubishi Fuso Truck & Bus Corp. after the agreement is completed and receive an unspecified amount of cash.

DaimlerChrysler demanded compensation for financial damages after Mitsubishi Motors admitted it had been hiding defects. Problems in Fuso commercial vehicles, including faulty wheel hubs and brakes, have been linked to fatal accidents. The German company took a 400 million-euro ($510 million) provision in the third quarter for recalls at Fuso.

``The problem at Mitsubishi Motors is rolling into a snowball,'' said Hitoshi Yamamoto, who manages the equivalent of $1 billion in Japanese equities as president of Commerz International Capital Management (Japan) Ltd. in Tokyo. ``Reaching an agreement with DaimlerChrysler is a step forward.''

Shares of DaimlerChrysler rose 22 cents, or 0.6 percent, to 36.30 euros in Frankfurt. Mitsubishi Motors shares rose 6 yen, or 4.3 percent, to 144 yen in Tokyo. The announcement was made after the close of the market in Japan.

Fuso Stake

DaimlerChrysler, based in Stuttgart, Germany, bought a 43 percent stake of Fuso in March 2003 and raised its holding in the truck and busmaker to 65 percent last year. Under today's agreement, Mitsubishi Motors will also maintain ownership of Netherlands Car BV, or NedCar, operations where it builds the Colt model and cooperates with Mercedes Car Group.

``We're very satisfied with the package,'' said Marc Binder, a DaimlerChrysler spokesman. Mitsubishi Motors spokesman Shingo Kimura declined to comment.

Fuso began recalling vehicles in March 2004 to repair faulty wheel hubs. The defect was blamed for a fatal accident which occurred in 2002. Fuso said it covered up defects and repaired some vehicles without notifying the transport ministry, in violation of Japanese law. The company's recall last year totaled more than 848,000 trucks and buses in Japan.

Mitsubishi Motors former president, Katsuhiko Kawasoe, and seven other former executives are in trial on charges including falsifying safety reports to the government and professional negligence over two fatal accidents involving its trucks.

Faulty Clutch

Japanese police also reported that a Mitsubishi Motors truck with a faulty clutch housing was involved in a fatal accident in 2002. Fuso began recalling vehicles with defective clutch housings in May.

Mitsubishi Motors, Japan's only unprofitable automaker, said today its third-quarter net loss more than doubled after it sold fewer vehicles in its home country and the U.S.

DaimlerChrysler's shares rose as much as 15 cents, or 0.4 percent, to 36.23 euros and were up 0.3 percent at 10:19 a.m. in Frankfurt. Mitsubishi Motors gained 6 yen, or 4.4 percent, to 144 yen in Tokyo.

Mercedes builds the Smart ForFour model, which shares parts at the NedCar factory. Mitsubishi Motors had been in talks to sell half its NedCar stake to the German carmaker and a complete takeover of the plant would have cost about 250 million euros ($319 million), German business daily Handelsblatt reported on Sept. 27.

Mercedes is wrestling with the unprofitable Smart unit. The company has delayed the introduction of the Smart sport-utility vehicle indefinitely, Mercedes Chief Executive Eckhard Cordes said last month at the Detroit car show.

Fuso said on Feb. 2 that overseas vehicle sales rose 27 percent in its third quarter, helped by rising demand in the Middle East and among Asian countries. Fuso is relying on Asia and the Middle East to counter a drop in sales at home.

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