Japan’s crisis-hit Mitsubishi Motors Corp. unveiled a survival plan Friday featuring a 450 billion yen cash injection, relocation of its head office from Tokyo to Kyoto and major cuts in its global workforce and Australian output.
It also aims to introduce 44 new models globally between fiscal 2004 and 2007 under the restructuring plan.
“This plan is our last chance for survival as an automaker, and all employees are determined to join forces to bring MMC back on track for recovery,” Yoichiro Okzaki, chairman, president and chief executive officer, told a news conference at the head office in Tokyo.
The sudden decision by MMC’s top shareholder, DaimlerChrysler AG, which owns a 37 percent stake, to halt financial support for the struggling automaker in late April has forced MMC and three other Mitsubishi Group firms to devise the restructuring plan.
Under the plan, MMC will get 450 billion yen from its group firms and other investors.
Of the total, 270 billion yen will be provided by Mitsubishi Group firms, 10 billion yen from MMC’s strategic partner in Taiwan, China Motor Corp., and 170 billion yen from the financial markets, the firm said.
“MMC will use 130 billion yen of the funds to pare debts and 320 billion yen will go toward revitalizing the company’s operations,” it said.
Preferred shares totaling 140 billion yen will be issued to Mitsubishi Heavy Industries Ltd., trading house Mitsubishi Corp., Bank of Tokyo-Mitsubishi and other Mitsubishi Group companies.
Bank of Tokyo-Mitsubishi and Mitsubishi Trust & Banking Corp. will swap 130 billion yen of debt for equity.
Funds procured from the market will come from plans to issue 70 billion yen in common stock to Tokyo-based Phoenix Capital, and 100 billion yen in preferred shares to J.P. Morgan Securities.
MMC’s interest-bearing debt totals 1.063 trillion yen as of March. The automaker hopes to slash interest-bearing debt by 40 percent in fiscal 2006.
Mitsubishi said it would cut its global workforce from 49,000 to 38,200 in fiscal 2006 as part of efforts to cut costs. MMC employs workers in factories and offices in Japan, the United States, Europe and Australia.
It will also close its engine plant in Adelaide, South Australia, in fiscal 2005, but keep its assembly plant there open. Production there will be scaled down.
In Japan, the company said it will cut 400 employees by moving its head office from Tokyo to Kyoto, where it has an engine and transmission assembly plant, in fiscal 2006.
At the same time, MMC will close down its Okazaki plant in Aichi Prefecture. By shutting down domestic and overseas plants, MMC aims to reduce production capacity by 17 percent in fiscal 2006.
For the growth strategies, MMC said it will focus on producing sport utility vehicles like the Pajero and Lancer.
By region, MMC will launch 16 models in the domestic market, 10 models in Europe, 7 models in North America and 11 models in China. Company officials said MMC hopes to sell 1.706 million vehicles globally in fiscal 2006. They pledged to come back to the black in net profit in fiscal 2006 under the revival plan.
The company also announced a new top management team to spearhead its revival plan, appointing Yoichiro Okazaki as chairman and chief executive officer, Koji Furukawa as vice chairman in charge of corporate social responsibility, and Hideyasu Tagaya as president and chief operating officer.
Koji Furukawa of Mitsubishi Corp. was appointed vice chairman of the newly established corporate social responsibility promotion office.
To prevent further coverups of defects and to reverse MMC’s plunging reputation, the carmaker will set up an ethics committee of four or five outside members from judicial circles.
MMC said it will also establish a corporate restructuring committee headed by outside investors. Phoenix Capital founder Yasushi Ando, who was appointed a board member of MMC, will lead the committee, the company said.
The new management team will seek approval from shareholders at their general meeting on June 29.
The latest rehabilitation package is considered practical by industrial analysts.
Koji Endo, director of equity research at Credit Suisse First Boston Securities (Japan) Ltd., said the automaker came up with “a reasonable plan,” at least in terms of restructuring.
“The plan deserves a positive evaluation (as far as the) head-count reduction, production capacity cut and the closure of the Okazaki plant,” he said.
MMC’s biggest problem is its loss of credibility with Japanese drivers.
It is currently under criminal investigation for possible defect coverups. On Thursday, Mitsubishi Fuso Truck & Bus Corp., which was spun off from the automaker last year, acknowledged that defects had probably been concealed. It announced a recall of 180,000 trucks.
That followed a massive recall two months ago of trucks for a wheel defect, which is under investigation in the 2002 death of a pedestrian. The company also admitted defect coverups in a massive recall of cars in 2000.
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