JAPAN: Mitsubishi bail-out to cost at least $1.9 billion
DaimlerChrysler and the Mitsubishi group are set to spend at least $US1.9 billion to bail out ailing Mitsubishi Motors, but the German carmaker will have to provide any extra support alone, a source close to the deal told the Reuters news agency.
Reeling under losses from loan control problems at its North American finance unit, Mitsubishi Motors, owned 37% by DaimlerChrysler, has been working out a restructuring plan with its shareholders over the past month and is also set to ask for government backing for the plan, final details of which are scheduled to be unveiled on April 30, the report said.
Under the plan, DaimlerChrysler and three Mitsubishi group companies - Mitsubishi Heavy Industries, Mitsubishi Corp and Bank of Tokyo-Mitsubishi - are set to buy at least 200 billion yen ($1.9 billion) in newly issued preferred shares in Mitsubishi Motors, the source from Mitsubishi group told Reuters, but the source said the capital injection was unlikely to reach 300 billion yen as reported by media, unless the German-US carmaker agreed to shoulder more of the burden.
"It's going to be difficult to agree on as much as 300 billion yen," the source, who declined to be identified, reportedly told Reuters, adding: "There's talk about needing as much as 500 billion yen for the total restructuring, but our feeling is DaimlerChrysler should take responsibility for the rest."
The source also reportedly said Mitsubishi Motors is set to request approval for a state-backed revamp to take advantage of lower taxes when issuing the new shares, and apply for loans from the government-owned Development Bank of Japan with the support of Bank of Tokyo-Mitsubishi.
Reuters noted that, hurt by a plunge in US sales and bad loans extended to customers with a shaky credit history, Mitsubishi Motors in February raised its net loss forecast to 72 billion yen from 11 billion yen for the business year that ended on March 31.
The source told the news agency that, as part of the plan, senior vice president Steven Torok, in charge of international car operations, will be asked to resign later this year to take responsibility of the poor performance in North America, the source said.
Reuters noted that the Nihon Keizai Shimbun business daily reported a day earlier that Mitsubishi Motors' top five executives, including chief executive Rolf Eckrodt and Torok, would step down around late June though Mitsubishi Motors denied the report.