The industry ministry said Friday it will help turn around struggling Mitsubishi Motors Corp. by granting it some 550 million yen in tax breaks.
The nation’s fifth-largest automaker received the go-ahead to restructure under the Industrial Revitalization Law, designed for troubled, vital and recovering companies.
Under the rehabilitation plan, MMC will be accorded tax breaks and other preferential measures. The automaker will be required to report the progress of rehabilitation efforts to the Ministry of Economy, Trade and Industry on a monthly basis.
METI has attached conditions that MMC must meet in return for receiving the preferential measures, officials said.
If the program fails to generate the intended result, the application of the law will be withdrawn, the officials said.
Emergency state-backed loans have recently been granted to business partners of the scandal-ridden automaker.
Industry analysts are meanwhile preparing for the worst.
“Once the government is assured it has secured a system to cushion political and social disruption that could be caused by the failure of MMC, there is nothing to stop anyone from pulling the plug,” said Yasuhiro Matsumoto, credit research analyst at BNP Paribas. “The capital injection merely buys time for the company.”
On Thursday, MMC received 74 billion yen from private equity fund Phoenix Capital in exchange for a 33 percent stake in the company. The move pushed out German carmaker DaimlerChrysler as controlling shareholder.
MMC also received 126 billion yen from U.S. investment bank JP Morgan for preferred shares that can be transferred into ordinary stocks in three stages, starting as early as next month.
The 550 million yen in tax breaks will be applied to registration of the issuance of these new stocks.
The total amount of the bailout package, including funds from companies in the Mitsubishi group, came to 496 billion yen.
A string of defect coverup scandals caused domestic sales of MMC vehicles to plummet 64 percent in June from a year earlier. Stock prices hit their lowest point this week since MMC trading began in 1988.
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