Mitsubishi Motors sank into losses for the fiscal first half on bad car loans and weak sales in North America, forcing the Japanese manufacturer to acknowledge it was stumbling in the third year of a turnaround under a partnership with DaimlerChrysler, Associated Press (AP) reported.

For the six months ended September 30, Mitsubishi Motors reported on Tuesday a net loss of 80.2 billion yen ($US737 million), far worse than the 6.64 billion yen net profit for a year ago, although the results were in line with the company's projections, AP said, adding that fiscal half sales totalled 1.21 trillion yen ($11 billion), down from 1.28 trillion yen a year earlier.

According to AP, chief executive Rolf Eckrodt said things will improve in the second half because the losses were largely caused by a one-time charge for buyers with bad credit in North America.

"You can call the US a big accident," he told Associated Press at headquarters in Tokyo, adding: "We are still on the right track."

Mitsubishi Motors forecast an 11 billion yen ($101 million) loss for the fiscal year ending March 31, 2004, on 2.6 trillion yen ($24 billion) sales, AP said.

As part of its revival with DaimlerChrysler, which owns 37% of Mitsubishi Motors, the car maker has cut costs, developed cars together and boosted profits in the last two fiscal years, which were the first two years of the planned turnaround, AP said.

AP added that Eckrodt acknowledged the unexpected problems in North America would mean a delay in the turnaround - the high cost of US incentives also hurt first half results although Mitsubishi Motors incentives are lower than those from American rivals.

Eckrodt told AP that car sales dropped in North America by 15% to 150,000 vehicles, while sales improved in other regions such as Europe and the rest of Asia, especially China. Mitsubishi Motors has suspended the planned expansion of its US manufacturing facility in Normal, Illinois, the report noted.

Worldwide, Mitsubishi Motors sold 773,000 vehicles during the April-September period, up 10,000 from the same period a year ago, AP said, while in Japan, 171,000 vehicles were sold, up 8,000 year on year. In Europe, sales totalled 104,000 vehicles, up from 101,000, on the success of the Outlander sport utility vehicle and Lancer sedan, the report added.

Associated Press said Mitsubishi is forecasting 1.58 million vehicle sales for the full fiscal year, up 2.4% from fiscal 2002.

AP noted that Mitsubishi Motors has struggled to regain its image in Japan after a defect cover-up scandal three years ago that ended up in millions of cars being recalled and a [current] police investigation into a 2002 accident in which a tyre fell off a Mitsubishi truck in Japan and crushed a pedestrian.

Mitsubishi Motors has also suffered the loss of its chairman, who was Eckrodt's partner. Takashi Sonobe, who took over the company after his predecessor resigned in disgrace over the recall scandal, died of heart failure last month, AP noted.

Eckrodt told Associated Press on Tuesday he cannot comment on a successor until after Sonobe's funeral later this month.