Mitsubishi Motors has announced that Yoichiro Okazaki, head of Mitsubishi Heavy Industries, will be the new chief executive of the company after the resignation of Rolf Eckrodt last week.
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The new chief executive is expected to drive forward a rescue plan for the company, which is currently in heavy debt after poor performance in some of its key markets. Several rescue partners have been potentially linked with Mitsubishi in the last week, including other vehicle manufacturers such as Toyota, although this is unlikely. Currently there are reports of Mitsubishi group companies organising a bail-out plan which Mitsubishi Motors will be hoping can raise $US2.3 billion to keep the vehicle division afloat.
One of the main reasons for Mitsubishi’s decline was a lacklustre performance in the US, which accounts for a third of all Mitsubishi Motors’ sales. Several key developments in the last few years have led to sales volumes being hit. Mitsubishi was plagued with instances of defective parts within its vehicles, which resulted in it receiving a lot of poor publicity. Attempts to tackle falling sales were made by targeting the youth market in the US through loosening its credit terms. This resulted in a high proportion of bad debt and as soon as credit control was tightened, sales dropped significantly. Lastly, the strong push into the fleet market did little to improve profitability due to the traditionally low margins available in this business.
Going forward, Mitsubishi needs to focus on the quality of its vehicles and repair the damage caused by negative publicity in the past. This is particularly important in the highly competitive US market where consumers are highly focused on vehicle ratings surveys and the positive or negative publicity that surrounds any vehicle manufacturer. The company can take some consolation from the fact that its European operations have become profitable and this should also be a key area for future potential growth.
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By GlobalData
