Mitsubishi Motors posts record loss

In this story: A damaged brand Aiming to break even this year Nissan further ahead RELATED STORIES

By Staff and wire reports

TOKYO, Japan -- Mitsubishi Motors Corp. on Friday said it posted its worst loss ever last year.

The scandal-plagued car maker, Japan's fourth-largest, lost $2.3 billion (278 billion yen) in the fiscal year through March 31.

That's slightly worse than forecast and over 10 times greater than its loss last year, of 23 billion yen.

Mitsubishi's numbers contrast sharply with the record profits announced this week by Japan's No. 1 car company, Toyota, and No. 3 Nissan.

A damaged brand

Mitsubishi has been weathering a scandal that it systematically covered up product defects. It admitted last year that it did not report problems with its cars to Japan's Transportation Ministry.

That has hurt its brand, auto industry experts say. The Tokyo-based company noted that domestic demand was down. Analysts are watching for signs the worst may be over.

For the year, Mitsubishi's sales slid 1.7 percent to 3.3 trillion yen.

Mitsubishi already recalled around 1 million cars last year. It predicted in March that costs from the recall and its turnaround would lead to a loss of 270 billion yen for the year.

On Thursday, the company recalled another 203,635 cars in Japan. It estimated that would mean another $32 million hit. It is also recalling 46,000 defective cars that it sent to Europe.

Aiming to break even this year

For the year just ended, Mitsubishi took an extraordinary charge of 320 billion yen. The recalls resulted in 51 billion yen of that.

Mitsubishi also started a broad revamp in February. It is launching new models, shutting plants and cutting 9,500 jobs, or 14 percent of its 65,000 work force.

The revamp meant a 106 billion yen extraordinary charge.

But Mitsubishi on Friday reiterated its forecast that it would break even this fiscal year. It also predicted a healthy sales boost of 6.8 percent, to 3.5 trillion yen.

"We aim to cut sharply fixed costs and material costs by pushing forward our turnaround restructuring plan in a bid to improve our financial strength," it said.

Mitsubishi said it would generate $163 million, or 20 billion yen, in operating profits for the year through March 2002. It had an operating loss of 74.9 billion yen in the year just ended.

Nissan further ahead

Analysts are skeptical that it can break even. They note that it would require a rapid transformation.

"It's certainly going to be a struggle for them," said Chris Richter, auto analyst with HSBC Securities in Japan.

Getting sales moving in the right direction in Japan will be hard because the scandal has put off consumers, he said.

DaimlerChrysler, which recently upped its stake in Mitsubishi to 37.3 percent, has sent Mitsubishi vice president Rolf Eckrodt to oversee the revamp.

Nissan is one year into its three-year restructuring. Under its turnaround artist Carlos Ghosn, Nissan on Thursday posted a record net profit of $2.7 billion.

The company, 36.8 percent owned by Renault, said its efforts to cut costs for parts were paying off. It also had further recover after years of bad management.

Japan's No. 5 automaker, Mazda, has called in outside help in the form of President Mark Fields to work its way out of trouble.

Mazda, which is one-third owned by Ford, will release its results May 25. It has forecast a record loss of 156.6 billion yen, due mainly to a pension-fund writeoff.

Analysts anticipate an easier road for Mazda than Mitsubishi. But both companies face significant challenges over the year ahead.

They will likely focus on cutting purchasing costs, which were badly managed, and trimming their sales ranks in Japan.

"Carlos Ghosn and Nissan set the trend," Richter said. "Mazda and Mitsubishi coming to the same conclusions of where the improvements have to be made."

Mitsubishi Motors was little changed Friday, dropping 1.0 percent to 393 yen in morning trade. Nissan stock dropped even further, down 1.2 percent to 836 yen, despite its good results after the end of trading Thursday.

Reuters contributed to this report.

Nissan joins Toyota in record profit
Mitsubishi cuts 9,500 jobs

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