DaimlerChrysler said on Thursday it was pulling out of Mitsubishi Motors, leaving its bid to become a global carmaker in disarray and throwing the future of the ailing Japanese firm into doubt.
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According to Reuters, the group said that it had decided not to participate in a rescue capital increase planned by Mitsubishi Motors Corp. because it could not agree an acceptable deal with other shareholders in the Mitsubishi Group.
It also reportedly said it would not provide any further financial support to Mitsubishi, Japan’s only unprofitable carmaker.
“This clearly means separation,” a DaimlerChrysler spokesman told Reuters, adding that the 37% stake would be booked as discontinued business until a buyer could be found.
The news agency said the decision came at an extraordinary meeting of the DaimlerChrysler supervisory and management boards on Thursday and just two weeks after chief executive Juergen Schrempp defended his global strategy in front of angry shareholders.
Reuters said Mitsubishi, Japan’s fourth-largest carmaker, had planned to seek shareholder approval for a 700 billion yen ($US6.39 billion) bailout on April 30.
Reeling from losses on offering cheap car loans in the US, Mitsubishi is expecting a net loss of 72 billion yen for the 12 months to March 31 after reporting a profit of 37.36 billion yen the previous year, the report said.
According to Reuters, Mitsubishi Motors’ net automotive debt stood at around 726 billion yen six months ago, while total interest-bearing debt was 1.141 trillion.
“This could be the end for Mitsubishi if nobody else injects fresh capital,” one industry source told Reuters.
The news agency noted that DaimlerChrysler bought the stake in Mitsubishi over three years ago with a view to expanding in Asia and the decision to cut its losses will pile pressure on Schrempp, who faced calls to resign at the annual shareholder meeting on April 7.
David Healy, an auto industry analyst with Burnham Securities, told Reuters that in “pulling the plug” on Mitsubishi it looked as if group board members had “finally rebelled against Schrempp’s pouring money down that financial black hole.”
Schrempp, who has presided over the loss of some €37 billion in market capitalisation since Daimler merged with Chrysler in 1998, was expected to provide further details of the strategic U-turn on Friday, the report said.
Reuters said that unwinding the Mitsubishi investment will also have significant repercussions for Chrysler, the group’s other problem child, because Chrysler and Mitsubishi have established close production ties in a bid to cut costs.
The major unanswered question, Burnham’s Healy told Reuters, was whether DaimlerChrysler had made alternate plans for new cars that Chrysler and Mitsubishi were due to develop jointly.
“It really depends on whether Mitsubishi Motors survives in its present form without the financial backing of its largest shareholder. The Chrysler Group and Mitsubishi have been co-developing new platforms and that’s a very important part of the small and intermediate passenger car programme for Chrysler,” Healy said, according to Reuters.
Without future collaboration with Mitsubishi, Healy said DaimlerChrysler would have to shoulder the entire development costs for Chrysler’s new car programme.
“Chrysler might have to spend more development money than they were planning and, since the development overhead on the new models will be a lot higher, the profit potential out of their new models would be less,” he reportedly said.
