Mitsubishi Motors reportedly posted a big quarterly loss on Monday and widened its full-year net loss projection even as it aims to tame a sales plunge with its newly launched compact car.
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Reuters noted that Japan’s only unprofitable car maker, hit by defect cover-up scandals and abandoned by shareholder DaimlerChrysler, was recently backed with $4.5 billion in aid from investment funds and sister companies in the Mitsubishi group. MMC came up with a sweeping restructuring plan in May, only to rewrite it a month later as its operations deteriorated faster than it had expected.
For the July-September term, MMC posted a net loss of 91.47 billion yen ($US868.1 million), much worse than the 29.08 billion yen a year earlier as it booked special losses to streamline its domestic assembly plants and pay for free vehicle inspection services and restructuring steps in Australia, the report said.
Earnings were also hit by losses at unlisted truck affiliate Mitsubishi Fuso Truck and Bus Corp. and the cost of issuing new shares for the financial aid package.
According to Reuters, second-quarter revenues fell 14% to 513.21 billion yen as sales contracted in all regions except Europe. Its operating loss came to 31.74 billion yen, better than the 34.05 billion yen loss in the year-earlier period, when it wrote down huge losses from loan defaults in North America.
MMC widened its net loss forecast by 10 billion yen to 240 billion for the year to next March, the report said. It warned it could book “a considerable amount” of valuation losses by next business year as it shrinks its excess output capacity further and reduces utilisation at its affiliated manufacturing and sales companies.
But it still expects to limit its operating loss to 120 billion yen this year by offsetting a drop in sales through a reduction in material and other costs.
Reuters said MMC is also counting on better sales in Europe and emerging markets such as Russia, where sales have been relatively unscathed by the recall scandal, to make up for the bigger-than-expected falls in Japan and North America.
MMC reportedly lowered its forecast for global retail sales to 1.357 million units from the 1.45 million projected in May and expects to sell 217,000 vehicles in Japan, down sharply from the initial estimate of 300,000.
“The forecasts seem more practical,” Koji Endo, auto analyst at Credit Suisse First Boston Securities, told Reuters. “Hopefully within the next three years its debt level will have improved and by then somebody should be interested in an equity tie-up,” he said, adding that a capital partnership with another auto maker was imperative for MMC’s survival.
Reuters noted that Japanese media have reported that MMC is seeking to cooperate with France’s PSA Peugeot Citroen in North America and Nissan Motor Co. in Japan’s minivehicle market, among other additional plans to boost its bottom line.
But MMC President Hideyasu Tagaya told the news agency that reports about a tie-up with Peugeot were speculative and that nothing had been decided with Nissan, but added that MMC was not ruling out cooperation with any auto maker.
“We’re basically aiming to rebuild ourselves on our own, but we are also considering operational tie-ups wherever there is a chance,” Tagaya said. “But I’m not at liberty to discuss such plans right now.”
According to Reuters, Tagaya denied recent media reports that MMC may delay the planned closure of the domestic Okazaki plant from end-2005, and said MMC still planned to shift its headquarters to Kyoto from Tokyo, responding to reports the move could be scrapped.
Tagaya reportedly was upbeat on MMC’s near-term sales prospects, saying showroom traffic in Japan had returned to year-ago levels after sales of the Colt Plus compact wagon began on Oct. 25 – its first new model since the defect cover-up scandal resurfaced in May.
Orders for the car reached 2,264 units as of Sunday, exceeding the 2,000-unit monthly sales target, he told Reuters, which noted that revelations that MMC and its truck arm had been hiding defects to prevent official recalls have cut MMC’s car sales in Japan by about 50% in almost every month since May.
But US sales are down 36% in the year to date as MMC tightened its lending stance, the Reuters report added.
