Mitsubishi Motors changing gears under new three-year turnaround plan

by Setsuko Kamiya

Mitsubishi Motors Corp. is banking on a three-year restructuring effort to change its traditional corporate culture and become a more market-oriented company.

Starting this month, MMC is implementing the Mitsubishi Turnaround Plan, a scheme it hopes will lead to sustainable growth and restore consumer confidence in an automaker that has been badly damaged by news that for decades it covered up defects and consumer complaints.

The plan calls for closing down MMC’s Oe plant in Nagoya, cutting procurement costs by 15 percent by 2003, and axing some 9,500 jobs, or 14 percent of its groupwide workforce, by March 31, 2004.

In an interview with reporters Wednesday, Rolf Eckrodt, vice president and chief operating officer for Mitsubishi Motors’ passenger car division, said, “The reform is not only about cost cuts or optimization of material costs, but about developing intelligent design and presenting competitive products to the market.”

Toward that end, Eckrodt, who was sent in from MMC’s alliance partner DaimlerChrysler AG, stressed that MMC has also changed its organizational structure by integrating the marketing division with the car research and development division.

He said the alliance with the German-American automaker has benefited MMC by giving it access to DaimlerChrysler’s design and other technologies.

The two automakers are set to further strengthen ties to cover commercial vehicles now that DaimlerChrysler has struck a deal with AB Volvo to purchase the Swedish truck maker’s 3.3 percent stake in MMC. The deal will raise DaimlerChrysler’s stake from 34 percent to 37.3 percent and effectively terminate its truck-and-bus tieup with Volvo.

The new arrangement means greater efficiency, said Takashi Sonobe, MMC’s president and chief executive officer.

“It’s best that we do both (passenger car and commercial vehicle) operations with a single partner,” Sonobe said.

Eckrodt agreed.

“The two activities, in terms of regions (where business is done) and products, fit together,” he said. “We can concentrate the energy of the company, and that makes life easier and creates more confidence.”

Eckrodt will remain COO in charge of passenger car operations with Takashi Usami, formerly deputy chief of the truck and bus division, becoming COO of that division. As a board member, he will also be involved in supervising the automaker’s overall operations.

MMC and DaimlerChrysler will begin talks next week to discuss details of their bus-and-truck tieups, but Sonobe said his firm has already decided to stop selling its Mitsubishi Fuso Canter, a light-duty truck, through Volvo channels marketed in Europe and Canada by the end of November. The operation will be transferred to DaimlerChrysler in December, he said.

There are four DaimlerChrysler executives, including Eckrodt, on MMC’s 11-member board, but Sonobe indicated that there may be more, depending on upcoming talks.

Under a new organizational structure adopted through the turnaround plan, MMC aims to clarify operational rules and responsibility for each job. “People in this company were aware of the problems they faced,” Sonobe said. “And they knew of solutions to improve the situation but never carried them out.

“Now we have clarified our targets and have actually began to work on them.”

He acknowledges that some senior employees are upset with the new strategy but said many workers, especially the younger ones, are willing to change.

MMC currently procures 17 percent of its auto parts from its group companies, but Sonobe said he will not hesitate to procure from outside the group.

“We need to be competitive both in quality and price . . . and it doesn’t matter whether the supplier is a group company or not,” he said.

Eckrodt added that he was encouraged by Minoru Makihara, chairman of Mitsubishi Corp., who told him not to protect the group when it comes to material costs and to treat them just like other suppliers. “If they are families of MMC, they should set a good example to do better, and they are willing to do that,” he said. “There are no restrictions (from the group) and there is a good atmosphere.”