Wednesday, June 16, 2004
Mitsubishi Motors to review revival strategy
Associated Press Tokyo, June 16
Shaken by a spate of cover-up scandals and the recall of hundreds of thousands of vehicles, Mitsubishi Motors Corp revised its turnaround plan on Wednesday to further lower costs by slashing paychecks and reducing research and travel expenses.
Hurt by plunging sales in the aftermath of the scandal, the Tokyo-based automaker said in a statement that it expects to lose an additional 60 billion yen ($548 million) in the current and following fiscal years.
Executives' salaries will be cut by a quarter to a half, while rank-and-file workers' wages will be cut by five per cent for the next two years as part of a plan to trim costs by 72.6 billion yen ($663 million) this fiscal year and next, it said.
The company will also forego retirement allowances for directors and the year-end bonus for employees, Mitsubishi Motors said. "Today's moves are aimed at avoiding risks that have surfaced since we announced our business revitalization plan on May 21," chief executive Yoichiro Okazaki said in a statement. "There are no changes to the main outline of our plan."
Suffering from deep losses and debts of more than 1 trillion yen ($9 billion), Mitsubishi Motors announced a plan last month to cut nearly 11,000 jobs -- about a quarter of its global work force -- close a car plant in Japan, and receive a cash injection of 450 billion yen ($4 billion) from several investors including conglomerate Mitsubishi, one of the automaker's owners. The Mitsubishi group of companies includes Mitsubishi Heavy Industries, trading company Mitsubishi Corp and Bank of Tokyo-Mitsubishi.
The steps announced on Wednesday also includes a speeding up of job cuts, but the statement did not give details. The company will also reduce expenses in advertising, head office operations and research in Japan. Overseas, it will halve costs related to outsourcing, travel and computer systems.
It also promised to thoroughly investigate defects to raise awareness about corporate ethics and win back customer trust. In July and August, the company will give seminars on business ethics for all executives and employees, Mitsubishi said.
US-German partner DaimlerChrysler AG, which owns a 37 per cent stake in Mitsubishi Motors, had already said it was no longer willing to pump cash into the Tokyo-based automaker. The reputation of Mitsubishi Motors, already tarnished by a recall cover-up scandal spanning decades that emerged in 2000, has been further knocked in recent weeks.
Last month, the company and its recently spun-off truck affiliate began to recall hundreds of thousands of vehicles, acknowledging that they had continued to cover-up dozens of design defects over the past four years. The recalls for Mitsubishi passenger cars announced this year affect 370,000 vehicles and most of its models.
Earlier this year, Mitsubishi Motor's truck affiliate Mitsubishi Fuso Truck and Bus Corp -- 65 per cent owned by DaimlerChrysler -- acknowledged it had concealed reported wheel hub and clutch defects that are suspected as the causes in two fatal accidents.
Katsuhiko Kawasoe, the former president of Mitsubishi Motors, and five other former Mitsubishi officials have been arrested on suspicion of professional negligence resulting in death. They were arrested in an accident in 2002 in which a Mitsubishi truck crashed and the driver died due to brake failure suspected of being linked to the clutch defects.
Five current and former Mitsubishi officials have also been charged with a number of offenses, including professional negligence resulting in death, over a separate accident in 2002 in which a pedestrian was crushed to death by a wheel that flew off a Mitsubishi truck.
Mitsubishi is recalling 450,000 trucks and buses this year to fix wheel hub design and dozens of other defects that it had kept hidden to avert recalls.
© HT Media Ltd. 2004.