April 26 (Bloomberg) -- Shares of Mitsubishi Motors Corp., Japan's fourth-largest automaker, plunged a second day after largest shareholder DaimlerChrysler AG abandoned a $6.4 billion rescue for the Japanese automaker, forcing Mitsubishi group companies to devise a new plan.

Shares of Mitsubishi Motors, which slumped by its daily limit of 25 percent on Friday, fell as much as 10.4 percent today to 216 yen and traded at 230 yen at 10:49 a. Shares of group companies Mitsubishi Corp., Mitsubishi Heavy Industries Ltd. and Mitsubishi Tokyo Financial Group Inc. also tumbled.

``Mitsubishi Motors could continue'' to fall, said Akihide Kinugawa, a Tokyo-based fund manager at T&D Asset Management Co. ``Especially if it turns out that DaimlerChrysler is going to sell its stake.'' DaimlerChrysler owns 37 percent of the Tokyo- based automaker.

Japan's largest stock brokerage Nomura Holdings Inc. today recommended investors to ``sell'' Mitsubishi Motors' shares, cutting its rating from ``reduce.'' On Friday, Standard & Poor's cut the automaker's credit rating to CCC- from B-, nine levels below investment grade. Moody's Investors Service put the carmaker's Ba3 credit rating on review for a possible cut.

Yoichiro Okazaki, a director at Mitsubishi Heavy who is to become chairman at Mitsubishi Motors, will be in charge of securing the money and creating a plan to revive the Japanese automaker, taking over from DaimlerChrysler. Mitsubishi Motors, which probably lost 72 billion yen ($661 million) in the year ended March 31, has 1.1 trillion yen in debt.

``The possibility of this company going out of business is negligible,'' said Graeme Maxton, managing director at Autopolis. ``It will probably be bailed out by the Mitsubishi group companies and possibly some assistance from the government.''

Executives have already said the Development Bank of Japan will loan up to 50 billion yen to help rescue the automaker.

DaimlerChrysler Chief Financial Officer Manfred Gentz told investors and analysts on a conference call Friday that the German automaker hasn't decided on the fate of its 37 percent stake in the maker of Pajero sport-utility vehicles.

New Plan

Okazaki, 61, will form a new management plan within a month, the Mitsubishi group companies said in a joint release on Friday. Okazaki joined Mitsubishi Heavy in 1965 after graduating from Waseda University's School of Science and Engineering.

Okazaki was president of Mitsubishi Heavy unit Mitsubishi Caterpillar Forklift America Inc. between 1997 and 2001, after which he became director and managing manager at the general machinery and special vehicle headquarters.

Mitsubishi Motors was created in 1970 when Mitsubishi Heavy shed its motor vehicle division. Ties with the Mitsubishi group remain. Mitsubishi Heavy owns 15 percent of the automaker while Mitsubishi Corp. holds a 5.2 percent stake.

Heavy Influence

Mitsubishi Heavy Industries, one of the group's leading members, was formed in 1934 by the merger of Mitsubishi Aircraft and Mitsubishi Shipbuilding. Mitsubishi Heavy manufactured the Mitsubishi A6M Type 0 fighter, commonly known as the Zero, widely used by Japan during the Second World War.

The Mitsubishi companies were planning to provide 120 billion yen in financial support to Mitsubishi Motors, executives said earlier this month before DaimlerChrysler said it intends to pull out of the bailout.

Mitsubishi Heavy, Mitsubishi Corp. and the Bank of Tokyo- Mitsubishi will ``do their best'' to revive the automaker, the companies said in a statement Friday.

Mitsubishi Motors and DaimlerChrysler formed an alliance in 2000 because the Japanese carmaker needed to cut vehicle development and production costs. DaimlerChrysler sought to expand in Asia.

New Partner?

DaimlerChrysler's Gentz said on the conference call Friday that Mitsubishi Motors and Chrysler would continue their plans to co-develop small- and mid-sized cars. The first models are slated for release in 2005.

``I could understand any reluctance the Japanese may have in searching for another partner after this disaster,'' Maxton said.

The Mitsubishi group of companies was formed in 1870 by Yataro Iwasaki on an island southwest of Tokyo in the city of Kochi. Its three-diamond corporate logo represents both the three-leaf crest of the Tosa clan, which dominated Kochi at the time.

Mitsubishi Motors is struggling after its U.S. sales fell 26 percent following a tightening of loan policies to counter surging defaults. The carmaker's brand has also been hurt by a global recall of more than 2 million vehicles in 2000 and 2001 and a truck recall by affiliate Mitsubishi Fuso Truck and Bus Corp. in the past two months totaling 130,000 units.

On the Tokyo Stock Exchange, shares of Mitsubishi Corp. fell 5 percent to 1,042 yen. Mitsubishi Heavy, one of Japan's biggest makers of heavy machinery, fell 3.4 percent to 315 yen. Shares of Mitsubishi Tokyo Financial fell 2 percent to 950,000.

To contact the reporter on this story: Lindsay Whipp in Tokyo at lwhipp1@bloomber.net

Last Updated: April 25, 2004 21:57 EDT