Troubled Mitsubishi Focusing on Retail Sales

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 division chief says.

Since taking over in September as chief executive of Mitsubishi Motors North America, Finbarr O’Neill says 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 announced last month that it would lay off 1,200 workers this fall at its only U.S. plant, in Normal, Ill., trimming car production as part of a worldwide revival plan.

In an interview, O’Neill acknowledged the enormous challenges in the ultra-competitive U.S. market but said he was optimistic that his plan for a leaner, more efficient carmaker would allow Mitsubishi’s North American operation to return to profitability in 2005.

“What we want to do is build natural demand for the product,” said O’Neill, 52, who’s credited with having led a turnaround at Hyundai Motor Co.’s American division before joining Mitsubishi.

For now, the results remain dismal. For the first seven months of 2004, Mitsubishi’s U.S. sales were down 31% from a year earlier, according to Autodata Corp. The reduction in fleet business contributed to the fall.

Mitsubishi sold 256,810 vehicles in the U.S. for all of 2003, down from 345,111 in 2002, ranking ninth among major manufacturers. The company has said it expected 2004’s final U.S. sales tally to be 185,000 to 200,000.

Though poor business in the U.S. has contributed to Mitsubishi’s problems at large, it’s only one part of an extremely troubled company. Tokyo-based Mitsubishi said last week that losses ballooned to $492 million in the latest quarter as sales plummeted in Japan as well as in North America.