Red diamonds now shining in black

MITSUBISHI says its decision to quit local car production has been vindicated with the announcement yesterday that it has turned around a $355.5 million loss in its fiscal year ending in April 2008 to a modest $1.0 million profit last year.

Speaking at a media briefing in Sydney yesterday to announce the financial status of the local arm of the Japanese company, Mitsubishi Motors Australia Limited president and CEO Robert McEniry said sales will only get better for the company as it enjoys demand driven by the federal government's 50 per cent tax allowance.

“Our balance sheet is in the strongest position it’s been in the company’s history,” said Mr McEniry.

The $1.0 million profit is the first for the local arm of Mitsubishi since March 31, 2002, when it recorded a $4.9 million profit. It has made a loss every year since, until the FY08 $1.0 million result.

Mr McEniry added that the FY07 loss was necessary for “future-proofing” the company for anticipated growth.

Of the $355.5 million loss in the year ending March 31, 2008, $289.7 million was due to the winding down of the local operation, and the balance due to stock rationalisation and improved business operations.



“In the last year we reduced our structural costs by $70 million we went through a product line rationalisation to reduce the number of models and the complexity of the models to allow the dealers to turn-over stock, to always have fresh stock and to improve cashflows to the dealers and [improve their] profitability. As a result of that, we reduced our inventory by over $65 million last year,” he said.

Mitsubishi has worked expressly on improving its cash position, going from being 96.9 million in debt in March 2008 to 16.8 million in March this year, to zero debt in June.

Mr McEniry said there is a discernable shift to improved sales volume chiefly due to the federal government’s 50 per cent investment deduction, and although it caught many manufacturers unaware, the picture is looking good for sales towards the end of the year.

“Because the budget came out in mid-May and the first cut-off or opportunity was June 30 and all companies had reduced inventories, either from the global financial crisis or financial institutions, that wouldn’t allow us to carry as much (or) dealers carry as much, or due to depleting of old stock,” he said.

“The pipeline to import the cars that were really going to be hit at the end of June period all have about a three-month supply cycle - that’s been a big factor. So no-one could build up inventory and stock fast enough to deliver them all by the end of June.

“You’ve got to say (the government incentive has) impacted (sales volume) five to ten per cent. It’s not only really happened in one month we’ve seen the impact in July as well and it’s still going in August as well and it could go on for another couple of months. And then we’re going to get another hit in October, November and December, before it expires in December.”