Photographer: Franck Robichon/EPA

Mitsubishi Motors Relies on Truck-Loving Thais as Crisis Deepens

  • Thailand is biggest overseas production base for Mitsubishi
  • Japan minicar plant halted on improper fuel-economy testing

Mitsubishi Motors Corp., embroiled in a car-rigging scandal at home in Japan, may find that its future increasingly hinges on its performance in Thailand -- the carmaker’s biggest overseas production base.

Paced by Thailand-built Triton pickups and Pajero SUVs, Mitsubishi Motors sold more than twice as many vehicles in the Southeast Asian region than in Japan for the fiscal year ended March 30. That gap is poised to widen substantially as the company stopped assembling the minicars that make up a majority of domestic sales and are now the subject of a probe involving faked test mileage data.

Keeping business humming in Thailand, Indonesia and the Philippines will be crucial for Mitsubishi Motors to weather the crisis that may necessitate the carmaker offering compensation to customers, Japan’s government and minicar partner Nissan Motor Co. This too will be no easy task. Toyota Motor Corp. has projected Thailand’s industrywide sales will fall a fourth straight year, to about half the peak reached in 2012.

“It’s a matter of what happens sooner -- Thai sales come back, or all the compensation demands come first,” Koji Endo, an analyst with Advanced Research Japan, said by phone. “The concern is that Mitsubishi Motors may run out of cash before Thai sales come back.”

At 484.7 billion yen ($4.5 billion), Mitsubishi Motors had the least cash among Japan’s major automakers as of the end of December. The fuel-economy fraud that first emerged last week has wiped out almost half of the company’s market value, which now stands at 441.7 billion yen.

In Japan, 7,777 companies employ about 410,000 people that rely wholly or in part on Mitsubishi Motors, Teikoku Databank Ltd. said in a report Thursday. The automaker is instead dependent on Asean for profits. It reported a 2.4 billion yen operating loss in Japan last fiscal year, compared with a 74.9 billion yen profit for the rest of Asia.

Mitsubishi Motors Thailand Co. paid out a 42.7 billion yen divided to its parent Thursday, according to a Tokyo Stock Exchange statement.

Deliveries in Asean have exceeded Western Europe in each of the last seven years. Whereas it sold off a car plant in the Netherlands in 2012, the company is about to further expand its manufacturing presence in Asean, with an Indonesia plant scheduled to open in April 2017 and build 160,000 vehicles in its first year. Those plans won’t change, Kai Inada, a company spokesman, said by phone.


‘Weakest Candidate’

“Mitsubishi is one of the weakest candidates in Europe, and there’s a question
mark if competing in this market is worthwhile,” said Stefan Bratzel, director of the Center of Automotive Management at the Bergisch Gladbach in Germany. “At 1 percent market share, it has to be marginal.”

Thailand’s Industrial Standards Institute declined to comment on Mitsubishi Motors’ disclosure until it’s had time to study the issue, Secretary-General Tawat Polquamdee said Thursday.

Mitsubishi Motors doesn’t have the North American presence to buffer a slump in domestic deliveries that Japanese peers including Toyota and Nissan have built. The company shut its only plant in the U.S. late last year after an extended slump in market share, which has fallen short of 1 percent every year since 2003.

“Almost perversely, the fact that they’re in the news might actually remind people that Mitsubishi is still selling cars in the U.S.,” Matt DeLorenzo, managing editor of researcher Kelley Blue Book’s KBB.com, said by phone. “There could be that sort of silver lining on this dark cloud.”

Japan Orders

Orders for Mitsubishi Motors’ vehicles in Japan have plunged after the company first revealed it had overstated the fuel economy of its minicars by as much as 10 percent. The automaker delayed its profit forecast for the current fiscal year, saying it’s assessing the future impact from testing irregularities involving an untold number of models since 1991.

The minicar production line at Mitsubishi Motors’ Mizushima plant was initially halted April 18 after earthquakes in Japan’s Kumamoto prefecture, spokesman Shinji Akiyama said. While the impact from the quake has faded, 1,300 of the plant’s 3,400 workers have been asked to take paid home leave since the company first disclosed the improper testing on April 20.

The shutdown has had a carryover effect on suppliers including Futaba Industrial Co., which gets about 10 percent of its revenue from sales to Mitsubishi Motors. A subsidiary of Futaba has halted a production line at its plant that makes components including mufflers and fuel tanks in Okayama, Japan, due to Mitsubishi Motors, spokesman Toshio Inoue said by phone.

Government Tests

Japan’s government will run fuel economy tests on nine Mitsubishi Motors models, Transport Minister Keiichi Ishii said Thursday in Tokyo. The ministry plans to compile data by June for the four minicars the company has said were tested and labeled improperly, he said.

“I’m taking this as a case that could affect our company’s existence,” President Tetsuro Aikawa told reporters during a press conference Tuesday. It’s unclear if models overseas are affected by the improper testing, he said Wednesday.

Should Mitsubishi Motors need to resort to asset sales, Ford Motor Co. may be interested in Mitsubishi Motors’ pickup and SUV business in the Asean markets, Satoru Takada, a Tokyo-based analyst at TIW, said by phone. European automakers such as PSA Group could be candidates to acquire its plug-in hybrid vehicle technology, he said.

Ford is open to any opportunities that make sense, “but that’s certainly not on my radar screen,” Chief Financial Officer Bob Shanks said Thursday in an interview. PSA Group isn’t interested in the plug-in technology, a spokeswoman said in an e-mail.

Chinese Partner

Mitsubishi Motors’ Chinese partner Guangzhou Automobile Group Co. may be interested in buying the company, Japanese media outlets have reported. Lu Sa, board secretary of Guangzhou Automobile Group Co., didn’t immediately reply to a text message seeking comment. The company has a joint venture with Mitsubishi Motors in China producing models including the Outlander and Pajero SUVs.

Mitsubishi Motors hasn’t decided anything related to asset sales and is focused on its investigation, said Inada, the company spokesman.

“It’s difficult to see positive factors regarding their earnings,” TIW’s analyst Takada said. “I have no idea how long this is going to last.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE