Troubled Mitsubishi Motors North America is axing a production shift at its Normal, Illinois plant. The move from two-shift to one-shift production starting in October 2004 will result in the loss of about 1,200 jobs – the plant currently employs 3,150.
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The automaker is cutting capacity in the plant by 22 percent to 140,000 units a year, according to the Reuters news agency.
“The move is part of strategic efforts by the company to more closely align its production volumes with market demand, maximise resources and increase long-term profitability for the company and its dealerships, MMNA said in a statement.
“We have significantly reduced our dependence on fleet sales and eliminated risky consumer financing products, which have resulted in lower sales volumes. As we work to rebuild natural retail demand for our vehicles, our production volumes must be adjusted accordingly,” company chairman and CEO Finbarr O’Neill said.
“This capacity adjustment will put us on a more solid foundation for long-term sustainable growth and profitability. We need to be a market-driven, not a production-driven company.”
Reuters noted that sales by Mitsubishi, which is struggling to rebuild itself after its partner DaimlerChrysler abandoned plans to rescue it earlier this year, have plummeted recently after a series of vehicle defect cover-ups – its US sales in June fell 48% from a year earlier.
While the recall scandals have had a significant effect, sales at the US operation have also been hit by a decision by previous management a couple of years ago to offer high-risk buyers such as students and low income workers low interest or no interest finance to boost volume. The plan backfired after a higher than expected number of customers subsequently defaulted on their vehicle loans.
The low-interest-financing promotion is also said to have ‘brought forward’ future sales and that, combined with the shortage of buyers due to adverse publicity over the recall scandals, has seens Mitsubishi North America’s sales plumment this year.
