Embattled Mitsubishi Motors has rewritten a revival plan to include more cost cuts after a string of recall scandals in the past month alienated drivers and put a bigger-than-expected dent in domestic sales.

According to Reuters, the revision on Wednesday came barely a month after Mitsubishi announced sweeping restructuring steps along with a $US4 billion emergency rescue package on May 21, and confirmed analysts’ views that its roadmap for survival was overly optimistic.

The report noted that the cash-strapped carmaker was already facing a shaky future after 37% owner DaimlerChrysler gave up on its rehabilitation, leaving Mitsubishi at the mercy of the Mitsubishi group and investment funds.

But prospects for a turnaround became bleaker as evidence of past defect cover-ups surfaced both at Mitsubishi and truck affiliate Mitsubishi Fuso Truck and Bus Corp, dealing a blow to already-weak domestic sales, Reuters said.

“Because of the recalls, it became necessary to take into account further risks (of a fall in domestic sales),” CEO Yoichiro Okazaki reportedly told a news conference. Sales of Mitsubishi cars excluding minis plunged 56% in May from the year before, the report noted.

Mitsubishi, Japan’s only loss-making car manufacturer, reportedly stuck to its official target of selling 300,000 cars in Japan this business year but said sales could actually fall short by 80,000 units.

According to Reuters, Mitsubishi said it would do more to slash costs, such as cut employee salaries and forego retirement allowances for executives, as well as execute deeper reductions in marketing, development and other costs.

It will also bring forward plans to reduce fixed costs, including job cuts. The timing for other plans such as plant closures is still undecided, Mitsubishi reportedly said.

Through these steps, Japan’s fourth-largest automaker aims to slash another 34.4 billion yen ($US314.4 million) in costs in the business year to next March and 38.2 billion yen next year, for total additional savings of 72.6 billion yen, Reuters added – it had originally earmarked cost cuts of 55 billion yen this year and 98 billion next year.

“We believe that through these cost cuts, we will be able to sufficiently absorb the risks to domestic sales for 2004/05 and 2005/06, and secure our initial profit targets,” Okazaki reportedly said.

On May 21, Mitsubishi forecast a net profit of 10 billion yen for next year after a projected loss of 230 billion yen this year, Reuters noted.

Mitsubishi reportedly estimated that if domestic sales totalled only 220,000 units in the year to next March, operating profit would be reduced by 30 billion yen ($274 million) and the sales volume would represent a 39% fall from last year.

Reuters said Mitsubishi also kept its global sales target unchanged at 1.453 million units this year, saying damage from the recalls was not as big outside Japan, but analysts and investors remained unconvinced.

“The effect of MMC’s recalls will begin to appear in overseas sales from now, and concerns of that happening are biggest in the North American market, where the company’s sales have been weak,” Yasuhiro Matsumoto, a credit analyst with BNP Paribas, told Reuters.

As part of the revised steps, CEO Okazaki reportedly said Mitsubishi would also step up efforts to restore customer trust by offering free inspections to all of its 3.6 million Japanese customers, while offering free round-the-clock roadside service to new buyers.

But investors told the news agency the efficacy of such schemes remains to be seen, especially given the magnitude of the scandals, and because Mitsubishi had been caught only four years ago hiding safety defects from authorities.

“We have been avoiding MMC for some time and we won’t consider investing in it until we see a clear sign that its sales are picking up or it is returning to the black,” a portfolio manager at a major Japanese asset management firm told Reuters. “The revised revitalisation plan alone does not help MMC win back investors’ trust,” he reportedly said, declining to be identified.