DaimlerChrysler backs out of Mitsubishi

MITSUBISHI Australia management is refusing to speculate on the implications of the announcement by DaimlerChrysler that it will not invest any more funds in struggling Mitsubishi Motors.

DCX is the controlling shareholder in MMC with a 37 per cent share. It was expected to reveal a revitalisation plan and further multi-billion dollar assistance for the loss-making car manufacturer on April 30.

Instead, after an extraordinary meeting of the DaimlerChrysler supervisory and management boards in Germany on Thursday, DCX announced it would instead withdraw from the plan and offer no further financial support to Mitsubishi.

The new investment being proposed was variously reported to range from 200 billion yen to 800 billion yen ($US1.8 billion to $US7.3 billion).

Reeling from losses on easy-term car loans in the United States, Mitsubishi Motors is expecting a net loss of 72 billion yen (around $US664 million) for the 12 months to March 31. It owes billions more in long-term debt.

The decision has huge implications for DCX’s plans to establish itself as a global car manufacturer. Mitsubishi had been seen as a key component of the plan in Asia and through extensive component and platform sharing with Chrysler.

The future of Mitsubishi Australia’s local mnaufacturing facilities in Adelaide had been in doubt even before DCX announced its pull-out and this latest crisis does nothing to alleviate the situation.

Indeed, DCX’s withdrawl raises question marks about the survival of the entire MMC operation globally.

However, Mitsubishi Group – which controls around a quarter of Mitsubishi Motors’ shares and comprises Mitsubishi Heavy Industries, Mitsubishi Corporation, and The Bank of Tokyo-Mitsubishi - has issued a statement declaring that they will “continue to give full support to the business revitalisation of Mitsubishi Motors” The statement added: “Mitsubishi Motors is currently evaluating the situation resulting from this announcement and will soon make further announcements”.

MMAL spokesman Charles Iles said it was too soon for the implications of DCX’s pull-out and the potential impact on Australia to be accurately assessed.

“We are proceeding as we have said before, we are committed to building a new car next year and we are proceeding down that path,” he said.

“Apart from that our position is no comment at this time, because you just can’t speculate what the outcome might be.” Mitsubishi Australia is currently developing a new generation Magna replacement for Australian manufacture and sale in 2005, but had also been negotiating with Japan for a second product line to replace a long wheelbase luxury car development program that had been effectively put on hold.

It has struggled to make money in Australia and is battling a slump in sale for the current generation Magna. MMAL’s future had looked strong for a while with the announcement of a $1 billion investment plan and the establishment of research and development facilities in Adelaide.

Earlier this week reports emerged from Japan that the DCX revitalisation plan would involve job cuts around the MMC world, including Australia.