Mitsubishi Sales Chief Ousted in Start of Expected Shake-Up

[Ikudni]

By TODD ZAUN

OKYO, April 2 - A top executive at the Mitsubishi Motors Corporation resigned Friday in what is expected to be the first in a series of top management changes in response to a steep drop in sales in the United States, ballooning losses and recalls at an affiliate in Japan.

Mitsubishi Motors said that Steven Torok, its head of international sales and marketing, left the company Friday to return to the Chrysler division of DaimlerChrysler, which also controls Mitsubishi. Mr. Torok's departure will probably be followed by that of the chief executive of Mitsubishi Motors, Rolf Eckrodt, and other members of his executive team as soon as next month, according to an executive close to the restructuring planning. Mr. Eckrodt would be succeeded by Andreas Renschler, the head of DaimlerChrysler's Smart car subsidiary, which is not yet selling cars in the United States. Mr. Renschler was also the leader of the team sent to Tokyo to draft an overhaul plan for Mitsubishi, said this executive, who insisted on anonymity.

Mitsubishi Motors plans to announce details of that plan on April 30 and will not comment on it until then, Fumio Nishizaki, a company spokesman, said on Friday.

The overhaul, according to the executive close to the planning, is likely to be financed through the sale of at least 200 billion yen ($1.9 billion) in new Mitsubishi Motors shares to DaimlerChrysler, the Mitsubishi Corporation and other companies in the Mitsubishi group. Mitsubishi Motors will use the money to develop new models and upgrade its manufacturing operations.

Thomas Fröhlich, a DaimlerChrysler spokesman, confirmed that the company was in discussions with Mitsubishi Motors and other members of the Mitsubishi group about a possible increase in capitalization, but said that no decisions had been made.

Mr. Torok was part of a small team of executives sent to run Mitsubishi Motors after DaimlerChrysler bought a major stake in the company in 2000. His departure comes as a new team is being dispatched by DaimlerChrysler in response to Mitsubishi's heavy losses at its United States operation. Mitsubishi, which makes the Galant sedan and Pajero sport utility vehicle, drew customers by offering loose credit terms, but the strategy backfired when many of those customers defaulted on their car loans.

In February, Mitsubishi Motors, which DaimlerChrysler controls through a 37 percent ownership stake, widened its forecast net loss for the year ended March 31 to 72 billion yen ($694 million) from 11 billion yen ($106 million), blaming charges to cover defaulted loans in the United States.

Analysts say Mitsubishi Motors badly needs cash to develop new vehicles that might help it arrest a sharp drop in sales in the crucial American market. The carmaker resorted to an increasingly aggressive marketing strategy over the last several years - with a heavy emphasis on deals that featured no down payments and no-interest financing - in large part because of the scarcity of competitive models.

Mitsubishi's vehicle sales in the United States plunged by a quarter last year and have declined 19 percent in the first three months of this year.

But because developing new cars from scratch can take two years or more, analysts do not see a quick turnaround.

"For 2004 and 2005, it's clear that Mitsubishi will suffer due to a lack of product," said Takaki Nakanishi, an auto analyst at UBS Securities Japan Ltd. "Their situation is extremely difficult."

Mitsubishi Motors' troubles are not limited to the United States. In Japan, the company's brand name has been severely tarnished by a series of embarrassing recalls. In the most recent, the company's affiliate, Mitsubishi Fuso Truck and Bus, recalled more than 45,000 vehicles after a series of accidents caused by wheels flying off moving vehicles. In one widely reported case, a young woman was struck and killed by a runaway truck wheel.

Mitsubishi Motors' sales in Japan have fallen almost continuously since it admitted in the summer of 2000 to systematically hiding problems with its vehicles to avoid costly recalls.

Mitsubishi's long struggle to get back on track contrasts with the turnaround at the Nissan Motor Company over the last three years. Managers dispatched from Nissan's top shareholder, Renault of France, rescued Nissan from near death in the late 1990's to make it one of the world's most profitable carmakers.

Led by the chief executive, Carlos Ghosn, broke with Japanese tradition and sold stakes it held in an affiliated network of parts makers and other companies. That raised money for Nissan to put into developing stylish new models, like the strong-selling Altima and Infiniti G35 sedans.

Mitsubishi Motors has no such stockholdings to sell off, and so faces a longer road to recovery, analysts said.

[Gilhuly]

This company needs some ass kicking.