Mitsubishi Motors will get extra cash to pay for restructuring as it struggles to repair an image and sales battered by scandals over cover-ups of vehicle defects and a growing number of recalls.
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According to Reuters, the company said on Tuesday it aims to raise up to 546 billion yen ($US5 billion) for a rescue package, 20% more than an original plan it announced in May. US investment bank JP Morgan Chase will put up an extra 50 billion yen.
The report said the news helped boost shares in the troubled car maker by over 6%, but analysts reportedly say its future remains uncertain and it needs to make further cost cuts to regain investor trust.
“Mitsubishi Motors gets more money than expected, but how will it use the funds? Institutional investors will not touch the stock unless the company adopts more drastic cost cutting,” an analyst at a Japanese brokerage who declined to be identified told Reuters.
Mitsubishi Motors reportedly said in May it had secured a $4 billion bailout, as part of which JP Morgan Chase would invest 100 billion yen and Phoenix Capital, a Tokyo-based investment fund, would chip in 70-100 billion yen.
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By GlobalDataUnder the latest arrangement, JP Morgan will buy up to 150 billion yen in preferred shares without voting rights, and Phoenix will buy up to 100 billion yen in common stock, Mitsubishi Motors said, according to the report.
According to Reuters, MMC plans to spend a total of 1.1 trillion yen on business revival steps in the next two years, including the 546 billion yen from the revised aid package, 480 billion yen in cash flow from operations and 70 billion yen in cash.
Of the total, 720 billion yen will be spent on reinforcing sales channels and research and development – it did not say what the rest would be used for, Reuters noted.
Mitsubishi Motors reportedly said on Tuesday its sales of new vehicles in Japan in the first 25 days of June fell 39% from a year ago.
Asked about overseas recalls, it told Reuters on Tuesday it plans no recalls in the United States but may recall a total of 5,000 vehicles in Germany and Australia. “We are facing an extremely severe business environment,” Mitsubishi Motors’s chief executive and chairman, Yoichiro Okazaki, told a news conference after an annual shareholders meeting.
“And we may see unexpected changes in our business scenario, but we are committed to achieve our goal to return to net profit in 2006/07,” he reportedly said.
The latest aid package also includes a 286 billion yen investment from Mitsubishi Motors’s main shareholders in the Mitsubishi group, including Mitsubishi Heavy Industries and Mitsubishi Corp., and 10 billion yen from China Motor Corp, Reuters noted – of that total, 295 billion yen had already been paid by Monday, and an extra one billion yen will come from another Mitsubishi group firm, Nippon Oil Corp.
