Mitsubishi Motors Australia Ltd harbours hopes of picking up the lion’s share of the group’s right hand drive Magna/Sigma/Diamante series production in the rationalisation of Mitsubishi Motors Corporation of Japan, writes Mike Duffy.

And the South Australian-based car maker is optimistic of getting the nod to build some right hand drive Chrysler vehicles to cement further its future as a car maker.

This would give MMAL exclusive rights to supply the UK, Japan, New Zealand and other significant right hand drive markets with Mitsubishi’s large car, plus a handy slice of global sales of RHD Chrysler vehicles.

The company is just a month away from posting a record $A200 million ($US110 million) loss on the back of a $A130 million ($US72 million) deficit in 1999 – a result which, in normal times, would not place it in a favourable position to ask for anything – other than its very survival.

But in a South East Asian economic zone still struggling to shake free from the recession, and battling long-standing difficulties created by the ever-powerful US dollar, these are anything but normal times.

MMAL’s managing director Tom Phillips said: “Our parent company has been aware for some time we will book a $A200 million loss for 2000. But we are not alone. Toyota has had a record year in Australia and it too will lose money. So will most other companies at the mercy of the dollar-yen exchange rates.

“We tore up $A150 million ($US83 million) before June and currency losses have cost us $A70 million ($US39 million) between then and the end of 2000.

“Therefore, while our financials are nothing to write home about, they will not come as a surprise to MMC.

“Similarly, our shareholders are aware of our plan to turn loss into profit and they are satisfied with our position and our plans to reverse a two-year trend.

“If a snapshot were taken of the company today, it would show we are trading profitably.”

Phillips will present his year 2001 business plan to the MMC board next month with numbers, he believes, that will add up to the first profit from car production Down Under for three years.

It will be the first time he will have met Rolf Eckrodt, the executive DaimlerChrysler recently appointed as Mitsubishi’s chief operating officer.

The MMAL recovery plan is based on selling 30,000 units of its Magna sedan and wagon range in Australia and exporting 20,000 Diamante- and Sigma-badged vehicles to the United States, the Middle East and New Zealand.

In 2002, Phillips – Toyota Australia’s sales and marketing director until he was head-hunted mid last year – plans to up the ante to 30,000-plus local sales and 30,000 exports.

This year’s target of 50,000 locally-assembled cars, plus another 30,000 CBU (completely built-up) vehicles imported from Japan – an assortment of Lancer/Mirage small cars, Pajero (Shogun) and Challenger four wheel drives and commercial vehicles – will, according to the budget and known variations, result in a profit.

All MMAL’s calculations are based on an Australian dollar value of 58 yen. If the exchange rate soars – and currently, the Aussie dollar is on the right side at 65 yen – then the profit will be more substantial. If it falls below the 58 yen rate, MMAL’s budget will be blown out of the water.

If MMAL gets either additional large-car volume from Mitsubishi Japan or windfall production from Chrysler, then its relatively meagre annual build rate of around 45,000 vehicles could skyrocket to over 100,000 units.

Phillips estimates that no major rework of the Adelaide production lines would be feasible until 2003 when the Magna comes up for a major revision.

“But, yes, it would be possible to send Magnas and Chryslers up the same production line. Anything is possible,” he says.

While the concept of a small affiliate in Australia “winning” volume from its parent or even Chrysler might be considered wishful thinking of the highest order, recent happenings and statements have to be considered.

MMAL Profit/Loss
1999 $130m LOSS
1998 $3.6m
1997 $106m
1996 $65.8m LOSS
1995 $43m LOSS
1994 $10.6m
1993 $11.3m LOSS
1992 $2.6m
1991 $23.8m LOSS
1990 $25.9m
1989 $71.2m
Firstly, MMC threw MMAL what appeared to be a lifeline in November when it injected $A172 million ($US95 million) into its Australian asset.

Two weeks later, senior DaimlerChrysler board member Dr Eckhard Cordes visited Australia and told journalists: “If we had decided we wanted to close down the MMAL operations we wouldn’t have put $A172 million into the plant.”

He admitted that the investment was a short-term solution to MMAL’s problems and said that the affiliate’s future was “a priority that needed to be resolved”.

Cordes said DaimlerChrysler’s operations in Australia were a role model for the rest of the world, due to its rationalising of services and integration of operations such as warehousing and spare parts distribution along with other ‘back-office’ functions.

Another top DaimlerChrysler official, Roman Fischer, chief executive of the group’s Asia Pacific operations, said the future of MMAL was on MMC’s “top three priority list”.

He, too, floated the concept of MMAL building RHD versions of the Neon small car, Voyager people mover, PT Cruiser hot rod or four wheel drive Cherokee or Grand Cherokee.

“If we had right hand drive versions of Chrysler’s other products we would sell a lot more vehicles in Australia and throughout the Asia-Pacific region,” he said.

Only a week before Christmas, two DaimlerChrysler directors on secondment to MMC visited Adelaide. One was MMC’s senior vice-president of international car operations Steve Torok; the other was MMC’s senior executive officer and corporate general manager Dr Alexander Paufler.

The two executives met with the Premier of South Australia John Olsen, but declined invitations to meet the media.

Mr Olsen did say, however, that MMAL was being considered as “a contract supplier” for Chrysler, Jeep or Mercedes-Benz.

The Premier said that a decision on MMAL’s direction would be announced by March.

Next, news leaked out that the South Australian government was negotiating with MMAL to offer a low or no-interest industry assistance grant, believed to be in the order of $A20 million ($US11 million).

To head off criticism that taxpayers’ money was to be used to ‘buy’ time for the local car maker, MMAL’s Phillips issued a statement insisting that the state government was not putting public money at risk.

“If a proposed loan fails to generate the level of additional activity, the money would have to be repaid – it’s as simple as that,” he said.

“The state government made an offer of assistance. Let me stress we are not asking for any handouts.

“For us to put a new model into production, or set up another assembly line, we would be looking at an investment of $A200 million to $A300 million ($US110-166 million).

“No government money would come our way until significant investment was guaranteed by our parent company.

“So there is no element of risk to the taxpayer or the government.”

Finally, Mr Olsen is known to be planning the latest of several trips to Stuttgart to meet with DC executives.

For once – and take special note that his government is in the final year of its four year term – Mr Olsen will say little about the purpose of his visit.

Perhaps all will be clearer when MMC supremo Eckrodt holds a planned press conference in Tokyo within the next week.

Author: Mike Duffy is motoring editor of The Advertiser and Sunday Mail in Adelaide, South Australia