Phoenix Capital’s plan to sell its shares in Mitsubishi comes in the light of a long period of poor performance by the much maligned car maker and a fall in its share price.
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The company’s sales have suffered badly since it was revealed that previous senior management concealed faulty and potentially dangerous problems in its vehicles. Since the scandal broke in 2000, the company has made a concerted effort to be more transparent and has engaged in several vehicle recalls in an attempt to regain customer confidence. However, investors at least appear unimpressed.
It is perhaps not surprising that Phoenix Capital, which owns a 28% stake in Mitsubishi, intends to offload its shares. For obvious reasons, investment funds are loath to hold on to shares that are in decline. Furthermore, over the last few months such funds have been reducing their stakes in automobile companies in the light of the downturn across the industry.
Under the proposed plan, Mitsubishi Heavy Industries would become the carmaker’s largest shareholder, increasing its stake from the current 7.9% to 15%. Mitsubishi Corp would also increase its current 2.8% stake to 14%. It is thus down to the group itself, with its proposed Y540 billion bailout, to nurse MMC back to profit.
It should also be remembered that this is not the first time that an investor has given up on MMC. The company received another blow last year when the former controlling partner, Daimler Chrysler, withdrew its support for the company and refused to provide any more cash.
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By GlobalDataIt is evidently very difficult to predict the future of the company. However, the fact that the Mitsubishi Group is set to become the largest shareholder may be good news for MMC. As the largest shareholder, the group is likely to be more interested in the long-term welfare of the company than was the case with Phoenix Capital.
SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
