Mitsubishi Motors, Japan’s sole unprofitable carmaker, reportedly said the pace of decline in domestic sales is slowing and a new Colt compact wagon in October will win back customers.

The slide in sales “has hit the bottom,” vice chairman Koji Furukawa said in an interview with Bloomberg News in Tokyo. “We don’t expect a further decline.” August sales will probably fall less than half from a year earlier, he said, though the sales decline has widened every month this year, dropping 52% in July.

Furukawa, 66, is in charge of restoring Mitsubishi Motors’ quality and regain customers’ trust after the carmaker and its affiliate recalled more than 800,000 Mitsubishi-brand vehicles in Japan this year for fixing faults. The Tokyo-based company, overtaken this year as Japan’s fourth-largest carmaker by Mazda, is counting on better quality, cost cuts, new models and fresh capital to recover, the report said.

“Mitsubishi Motors is at a stage where it has to prove whether it can survive as an automaker,” Hitoshi Yamamoto, president of Commerz International Capital Management (Japan) Ltd. in Tokyo, told Bloomberg News. “The priority for the company now is not only to recover its damaged reputation but also to build a structure to ensure trust and safety in its cars.”

Beginning in September, Mitsubishi will budget funds to improve its quality, according to a June program unveiled by Furukawa, the report said. The carmaker’s quality unit will work with the product development division to use customers’ feedback to improve designs, according to the plan.

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The carmaker may sell 220,000 vehicles in Japan in the year ending March 31, Furukawa reportedly said. Last fiscal year, the automaker sold 305,800 vehicles.

The company, which had not had a new vehicle model in 15 months, reportedly will sell two new designs in 2005 and five models in 2006, including successors to its Diamante luxury sedans and Delica Spacegear wagons.

The Colt, which goes on sale in Japan in October, is a compact wagon that competes with Nissan’s Cube Cubic and Honda’s Mobilio. It can carry five people in two rows of seats with a 1.5-litre engine and may sell for between 1.1 million yen and 1.8 million yen ($US16,430), Bloomberg said, citing Best Car magazine.

It will be Mitsubishi Motors’ first new model since May 2003, when it started selling the Grandis minivan, the report noted.

Bloomberg News noted that Mitsubishi Motors recalled more than 216,000 vehicles to fix flaws including defective brakes and engines over the last two months. The company had repaired the defects without notifying the nation’s transport ministry.

In the US, the company’s second-largest market, Mitsubishi Motors said it may not return to profit until 2006, according to Bloomberg News. As many as 14 US dealers may stop selling the company’s cars.

Furukawa became the vice chairman at the automaker in June after a career at Mitsubishi Corp., the report added.

The carmaker reportedly is reviewing more than 579,000 customer complaints, company minutes and other documents from as far back as January 1979. It is investigating whether past management concealed defects. The company plans to announce the results on August 26, Furukawa told Bloomberg News.