The key to survival for Mitsubishi Motors Corp.’s American arm is creating interest in vehicles, not in the former financing schemes that attracted high-risk buyers and led in part to the company’s downfall, the Japanese automaker’s North American boss reportedly said.
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Since taking over in September as chief executive of Mitsubishi Motors North America, Finbarr O’Neill told the Associated Press (AP), he has scrapped the risky financing deals and significantly reduced sales to rental and other fleets, shifting the focus to the more-profitable retail business.
In an effort to cut costs and better align supply with demand, the company reportedly announced last month it will lay off 1,200 workers this autumn at its only US plant in Normal, Illinois, trimming car production as part of a worldwide revival plan.
In an interview with The Associated Press (AP), O’Neill acknowledged the enormous challenges in the ultra-competitive US market, but said he’s optimistic his plan for a leaner, more-efficient carmaker will allow Mitsubishi’s North American operation to return to profitability in 2005.
“What we want to do is build natural demand for the product,” reportedly said O’Neill, 52, who’s credited with leading a turnaround at Hyundai’s American division before joining Mitsubishi. “That means volumes are going to be disappointing in the short run. We won’t have fleet sales to fluff it up and the deals to fluff it up.”
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By GlobalDataFor now, the results remain dismal, AP noted. For the first seven months of 2004, Mitsubishi’s US sales were down 31% from a year ago, according to Autodata Corp., though the reduction in fleet business contributed to the fall.
Mitsubishi sold 256,810 vehicles in the United States for all of 2003, down from 345,111 in 2002, ranking it ninth among major manufacturers. The company has said it expects 2004’s final US sales tally to be between 185,000 and 200,000, the report added.
AP noted that, in recent years, Mitsubishi became well known for touting zero-percent financing, requiring no money down and deferring payments for several months – a lure for many young consumers who eventually were unable to make their payments.
“We were rockin’ and rollin’, but we were doing it in a way that just wasn’t conducive to long-term business – get the deals done today, get the people on the street,” a dealer told AP.
The report noted that business has suffered in the wake of the automaker’s admissions earlier this year that it had continued to hide auto defects to avert recalls, although it had promised to end a systematic cover-up when a similar scandal surfaced four years ago.
O’Neill, a soft-spoken Irish immigrant, told the news agency matters overseas have been a distraction at times to his efforts to restructure his own outfit, but he remains steadfast. Part of his strategy is to streamline the vehicle portfolio and focus on a couple of key vehicles.
For example, AP noted, Mitsubishi is ridding itself of two vehicles, the upscale Diamante sedan and the Montero Sport sport utility vehicle, which is too similar to a newer SUV called the Endeavor.
Mitsubishi also plans to re-enter the mid-size pickup truck market in 2005 with a vehicle to be jointly built by DaimlerChrysler ‘s Chrysler Group which owns a 24.7% stake in Mitsubishi, the report added.
“With a company our size, we’ve got to be very focused on how we promote the product,” O’Neill told the Associated Press. “We need one clear message, and it’s got to be about a couple of core products. In our case, we’ve chosen the Galant and the Endeavor. It’s a challenge, but you can be profitable with a limited product line.”
Borrowing from his strategy while running Hyundai from 1998-2003, O’Neill has instituted a 10-year, 100,000-mile powertrain warranty on Mitsubishi’s 2004 models, which he says underscores the automaker’s confidence in its vehicles, AP noted.
Mike Wall, an industry forecaster for CSM Worldwide, told the news agency O’Neill’s turnaround bid at Mitsubishi will likely be tougher than the one at Hyundai, in part because of Mitsubishi’s limited lineup.
“Hyundai was able to offer good pricing and some pretty decent products on the lower end to bring folks in,” Wall reportedly said. “But there’s so much competition out there with Toyota and Honda and Nissan and the Big Three and Koreans, you have to wonder if (Mitsubishi’s) products are compelling enough to bring people into the dealership on their own. It’s going to be tough, that’s for sure.”
