Mitsubishi Motors Corp.’s three top executives stepped down Friday for failing to revive the ailing automaker, which announced the same day that it is receiving a 540 billion yen bailout halfway sponsored by other group firms.
But MMC chief financial officer Hiizu Ichikawa said that external consultants have reviewed the plan and claimed he was confident it would work.
“Despite our extremely conservative sales forecast, our measures this time will enable us to turn to the black,” he figured.
Sales at MMC have been plunging in the wake of decades of defect coverups involving thousands of vehicles. The latest coverup, which also spurred recalls, surfaced last March.
Chairman Yoichiro Okazaki, President Hideyasu Tagaya and Vice Chairman Koji Furukawa all stepped down. In their place, the automaker named MHI Chairman Takashi Nishioka as the automaker’s new chairman and chief executive, and MMC Managing Director Osamu Masuko as its president and chief operating officer.
Under the turnaround plan, three group firms — Mitsubishi Heavy, Bank of Tokyo Mitsubishi and trading house Mitsubishi Corp. — will inject 270 billion yen into the automaker to boost its capital.
MMC hopes to use the funds for research and development on new models. It will also form tieups with other automakers to let them sell MMC vehicles under their own brands and attempt to boost operations in North America.
Of the 270 billion yen, 50 billion yen will come from MHI, 70 billion yen from Mitsubishi Corp. and 100 billion yen from BTM, all in the form of new share issuances. BTM will also swap 50 billion yen of debt for equity. MMC also expects to secure 270 billion yen in loans from the government-backed Development Bank of Japan and other lenders.
Collectively, the deal will turn the three companies into MMC’s top shareholder with a stake of 34 percent, surpassing Phoenix Capital Co. and DaimlerChrysler AG.
MHI alone will have a stake of 15 percent, making MMC a consolidated affiliate.
Yasuhiro Matsumoto, a credit analyst at BNP Paribas Securities (Japan) Ltd., described MHI’s decision to turn MMC into an affiliate as “the wrong choice.” MHI will have to bear an enormous burden, he said.
In a separate news conference at MHI headquarters, President Kazuo Tsukuda tried to convince investors that the decision to extend another round of costly help was justifiable.
“If (MMC) goes bankrupt, its impact on the stakeholders will be immeasurable,” he said. “That will lead to the downfall of the Mitsubishi brand, which in turn will affect our firm’s business.”
He said there was no talk of merging the automaker with Mitsubishi Heavy and that there wouldn’t be in the future. The automaker cut its global sales target to 1.5 million vehicles in fiscal 2006 from its initial target of 1.7 million units. For fiscal 2004, the company expects its net loss to widen to 472 billion yen from 240 billion yen.
The anticipated hole in sales should be partly covered by tieups with PSA Peugeot Citroen of France and Nissan Motor Co., which will sell MMC vehicles under their own brands, MMC said.
MMC will deliver 36,000 minivehicles a year to Nissan. Sales will start in June.
MMC said it will also start a contract with Peugeot in February, but did not elaborate.
To revive its auto loan operations in North America, MMC will set up a joint venture with Merril Lynch & Co. in the near future.
Under the previous revival plan, MMC received a 496 billion yen capital injection — including 366 billion yen in cash — from Mitsubishi group firms and outside investors. The plan was crafted after DaimlerChrysler halted financial support to the ailing automaker.
Pressured by creditors, MMC had to use most of the procured funds during the April-September period to pare its interest-baring debts worth some 350 billion yen.
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