Mitsubishi Motors Corp. on Wednesday released a revised turnaround plan featuring an additional 73 billion yen in cost cuts in response to plunging car sales following a series of recall scandals.
MMC was forced to revise its revival plan announced May 21 due to dwindling consumer confidence.
The new plan covers two fiscal years through March 2006 and includes a 5 percent salary cut and no winter bonus in 2004 for 14,000 rank-and-file domestic employees.
Retirement allowances for directors will be suspended and their salaries will be cut by between 25 percent and 50 percent.
MMC also plans to revise down the guaranteed annual yield of employee pension plans to 1.5 percent from 4 percent.
It also plans to cut overheads in global operations by 15.3 billion yen in fiscal 2004, rising to 20.3 billion yen the following year.
These measures “will surely cause severe pain for the employees, but are inevitable if we are to overcome our last challenge,” MMC Chairman and President Yoichiro Okazaki told a news conference at the firm’s head office in Tokyo.
MMC revised downward its domestic sales target for the current fiscal year to 220,000 vehicles from about 300,000 under its original plan. The fiscal 2005 target is 260,000 vehicles, down 80,000.
MMC expects a 30 billion yen loss in each of fiscal 2004 and fiscal 2005 due to the sales decline.
New car sales fell 19 percent in April and 56 percent in May from year-before levels, apparently due to the firm’s tainted image with consumers.
MMC plans to trim 140 workers from its domestic workforce in fiscal 2004, with a further 250 to be let go in fiscal 2005. It said there will be no change to its overall plan announced May 21 of cutting a total 11,000 employees worldwide by the end of 2007.
The company said it might bring forward the dates for domestic and overseas plant closures, including those in Australia.
Yasuhiro Matsumoto, a credit analyst at BNP Paribas Securities (Japan) Ltd., warned that automaker’s ordeal may continue.
While the additional cost cuts seem helpful, “MMC’s business outlook is still severe,” Matsumoto said, citing several negative factors such as a possible decrease in its overseas sales.
MMC may also face a compensation claim by DaimlerChrysler AG, which holds a majority stake in Mitsubishi Fuso Truck & Bus Corp., over the truck maker’s recall problem, he said. Mitsubishi Fuso was part of MMC until January 2003.
Mitsubishi Fuso announced a series of recalls over the past few months after admitting that it had concealed structural flaws and failed to promptly issue recalls.
MMC said it failed to recall about 164,000 vehicles. It admitted its involvement in new defect coverups on June 2.
A total 19 models — covering most major models — are affected by MMC’s fresh recall.
Earlier this month, former MMC President Katsuhiko Kawasoe and other former executives were arrested over defective clutch housings that caused a number of accidents, including one fatality, in Yamaguchi Prefecture.
MMC recall submission
Mitsubishi Motors Corp. said Wednesday it will submit 10 recalls to the government on Friday for a total 50,837 vehicles.
The 10 recalls are among 26 newly found defect coverup cases, MMC said.
Models subject to the upcoming recalls include Pajero, Minica, Lancer and Mirage, with insufficient supply of oil to cylinder heads and weak screwing of shift cables being among the defects.
Japanese certifiers suspended Mitsubishi Fuso Truck & Bus Corp.’s ISO 9001 certification on quality control earlier this month due to the firm’s involvement in vehicle defect coverups, examining organizations said Wednesday.
The ISO 9001 is the highest attainable quality ranking in the International Organization for Standardization 9000 series.
Around 37,000 Japanese firms have acquired it.
The Japan Gas Appliances Inspection Association, one of the organizations, said Mitsubishi Fuso’s ISO certification became temporarily invalid June 1.
If the truck maker does not file any complaints within 45 days, the three-year validity of its ISO 9001 certification will expire in August and screening bodies will eventually revoke the certification, the association said.
Following a May 20 news conference by Wilfried Porth, Mitsubishi Fuso president and chief executive officer, when further cases of neglecting defects were revealed, ISO examination bodies concluded that the company’s quality control system was not functioning and that the truck maker’s approach of secretly repairing defects clearly violated Japanese laws.