DaimlerChrysler’s decision not to pump any more cash into multibillion dollar debt-burdened Mitsubishi Motors Corp has been described as a “disaster” for the company which has suffered from plunging car sales and a spate of recalls.


“This is a disaster for Mitsubishi Motors,” Koji Endo, auto analyst at Credit Suisse First Boston in Tokyo, told Associated Press (AP), adding that the carmaker probably was scrambling to find another partner.


“The company is about to vanish if things continue this way,” he told AP.


The news agency said shares in Mitsubishi Motors plunged in Tokyo, finishing down 25%, the day’s allowed limit, to $2.20 after DaimlerChrysler said it had “decided not to participate in a capital increase” planned by the Japanese carmaker.


AP said the news killed off speculation that the German-US carmaker would unveil a Mitsubishi revival plan that would include hundreds of billions of dollars of additional cash, though the news sent DaimlerChrysler’s stock price up 7.3% in morning trading on the Frankfurt stock exchange to $46.10, reflecting market sentiments that the move was sensible for the German-US firm.


DaimlerChrysler spokesman Thomas Froehlich told AP from the company’s Stuttgart headquarters that a decision had not yet been made on what it will do with its 37% stake in Mitsubishi Motors.


Associated Press said Standard & Poor’s Ratings Services downgraded its long-term corporate credit rating on Mitsubishi to “CCC-” from “B-” citing heightened debt risks – Mitsubishi Motors is shouldering $10.4 billion in debts.


AP said that the Mitsubishi group of companies – major shareholders that make up a powerful conglomerate with roots in the 1800s – was stunned and a joint statement reportedly said the companies were looking into DaimlerChrysler’s announcement, which came as a surprise in the midst of talks between the companies to hammer out a revival plan together.


The companies will continue to do their “utmost” to turn around Mitsubishi Motors, the statement said according to AP, but they stopped short of promising more cash. Mitsubishi Heavy Industries owns 15% of the carmaker, trading company Mitsubishi Corp. a 5% stake, and Bank of Tokyo-Mitsubishi 3%, the report added.


The Japanese government reportedly also expressed concern, indicating that a domestic bailout may be in the works.


“It’s a crucial matter that could affect the fate of the company,” TRANSPORT Minister Nobuteru Ishihara said, according to AP.


“The situation can be called a crisis for Mitsubishi Motors,” Nobuaki Yanachi, auto analyst at UFJ Tsubasa Securities Co. in Tokyo, told Associated Press, adding: “Even with the extra money, a turnaround would have taken a long time.”