By Peter Nunn of edmunds AutoObserver (October 1, 2007)
Source:
http://www.autoobserver.com/2007/10/mitsubishi-moto.htmlThe past decade has been a true
roller-coaster ride for Japan's Mitsubishi Motors. Beset by scandals in Japan, a dramatic fall off in North American profitability and having its main partner, DaimlerChrysler, part company, Mitsubishi had been buffeted by one storm after another.
After racking up huge losses on top of those storms, now comes the turnaround. A three-year business plan coupled with a string of hot new models, with the new Outlander and Lancer leading the way, has seen Mitsubishi undergo the classic product-led recovery.
On Monday, Mitsubishi, now Japan's fastest-growing car exporter, saw its stock jump to its highest level in two months on the Tokyo Stock Exchange. That came after Mitsubishi tripled its operating profit forecast last Friday.
Since January 2005, Osamu Masuko, 58, has been Mitsubishi's personable president and chief operating officer and the man at the helm as Mitsubishi trod the harrowing but now successful path back to profitability. Masuko, who has a business background from the Mitsubishi Corp. and is a 35-year Mitsubishi veteran, spoke to AutoObserver’s Peter Nunn in Tokyo.
Three years ago, Mitsubishi was in deep crisis. Now you are profitable again. How did you come back to profit, and where are you now in the recovery cycle?For sure, we had a very tough time in 2004. However on January 28, 2005, we announced a new three-year Mitsubishi Motors Revitalization Plan, and, during 2006 and 2007, we basically followed through with this plan. This is the last year of the plan.
What were the key parts of the plan? What we did first of all was to embark on changing the corporate culture and the corporate structure. We wanted employees to do their job with a sense of crisis in mind. In the first instance, they should understand what kind of situation the company was in and why it happened. So we started talking directly with employees including those on the factory floor. Looking outside the company, recovering trust and improving business were big pillars (to our recovery).
And Mitsubishi's business results are now looking much better.As we carried through with the plan, we posted an operating profit in fiscal 2005 (April 2005 to March 2006) one year earlier than planned. Operating, pre-tax and net profit figures all returned to the black in the latest period, in fiscal 2006. One prime factor in Mitsubishi's recovery has been strong products which customers appreciate, in particular, the Outlander, i, Pajero and Delica D:5. The Lancer is also going well in the U.S., too.
So Mitsubishi inside has been shaken up.... The message I've sent as the president is all about decision, performance, speed. Deciding things without waiting, performing once a decision's been made. Speed means, let's do it quickly. We have to overcome problems by sharing information, which I think has been going well until now. In particular, I tell people that bad news should be shared straightaway. As for good news, well, it's OK to wait a while.
You're back in profit but the recent volatile yen/dollar rate can have a big effect on earnings. If the yen soars to ¥110 to the dollar, can you still make a profit? The recent exchange rate (of around ¥118-¥120) has helped exporting companies, no doubt. I assume a profit could be gained even at ¥110. This fiscal year (2007-'08) we aim to be in profit, and we are making efforts to ensure our company earns profits consistently without being influenced by exchange rates and prime oil prices, even if they do fluctuate to a certain degree. We won't turn into the red even if the yen goes up to 110 yen.
Mitsubishi's capital tie-up with DaimlerChrysler came to an abrupt end. What now? Are you happy with the current situation or looking perhaps for a new partner?
We still hold an alliance with DaimlerChrysler, which will stay. Our leading shareholder, which was DaimlerChrysler, is now the Mitsubishi group. Three Mitsubishi group corporations hold a 34-percent stake and support us. During the DaimlerChrysler era, Mitsubishi was positioned as part of its strategy. But now, we can think what's best for MMC, and we can make that decision. That's a good thing.
So, no new partner?
Since MMC is devoted to fulfilling the Revitalization Plan, we're not searching for a new partner especially in terms of a capital alliance. We are, however, implementing alliances (tie-ups) with OEM supply, technology and components. We think that working cooperation will go up in individual cases from now on, too.
Could you talk about those individual alliances?
Well, we're in rather a good relationship with DaimlerChrysler as a business partner right now. We get the Raider truck from them in the U.S., and we're together with the development and manufacturing of the World Engine (for both Chrysler and Mitsubishi vehicles). MMC supplies engines to DaimlerChrysler. We supply OEM minicars to Nissan in Japan. We also do an OEM supply of the Outlander to PSA in Europe. DaimlerChrysler, in turn, supplies us with diesel engines. We, MMC, also buy diesel engines from Volkswagen.
Is Mitsubishi planning fresh ties with the new-look, privatized Chrysler?
As far as Chrysler is concerned, no specific talks are underway.
How do you see Mitsubishi's business in North America now, and in the years ahead?
Other automakers have been doing good business in the U.S., but Mitsubishi's case has been extremely severe in recent years. That's because we took wrong steps in terms of sales. We relied on unreasonable sales financing, fleet sales and so on. As a result, trust from dealers collapsed and trust from customers also couldn't be obtained.
How did you mount a comeback?
We posted a Japanese executive as president (Hiroshi Harunari who took over as chief executive of Mitsubishi's North American operations in January 2006). We recovered trust from the dealers, implemented commitments to the U.S. market and made a return to normal sales. As a result, we think we've achieved the targets of the first phase. Next we think we're about to enter the second growth phase. The Lancer and Outlander models exported from Japan have been going well. We'll also build up locally-made products as we draw a growth strategy in the U.S.
Just to confirm, Mitsubishi's operations in the U.S. are in the black?
In fiscal 2006 (April 2006 to March 2007), we posted an operating profit. This year, fiscal 2007, it may be plus or minus zero, we do not know now yet since we've been investing in sales promotion and advertising.
Small, fuel efficient, eco-friendly cars are now big in North America. Are you thinking about maybe entering the market with the Colt or tiny i minicar?
If you ask if there's a plan, the answer is there's no such plan is on the table. From the global viewpoint, however, interest in the environment is now so high. With the price of crude oil also high, global demand for small cars is sure to go up. Mitsubishi is working on developing a small car, which may be the next Colt. The current Colt has done well in Japan and Europe, therefore the next small car may be for Asia, ASEAN, and U.S. as an extension of the line, in addition to Japan and Europe. However, there's no concrete plan - such as when and how many.
Where you on hybrids?
We don't have a hybrid vehicle at present. But we are developing a clean diesel engine and will start manufacturing it in 2009. We've started selling a flexible fuel vehicle (with up to 85-percent ethanol mix) in Brazil and since there also seems to be some demand in Europe and the U.S., we'd like to think about that while watching the market conditions for FFVs.
Mitsubishi continues to pursue electric vehicles...
Yes, we are developing EVs and doing some initial testing. We'd like to boost the numbers of electric vehicles. The technology that goes into them could be adapted to developing a hybrid. We'd like to build an electric vehicle and have it lead to a plug-in hybrid.
But the problem is still the battery...
We're going to establish a joint venture among GS Yuasa Corporation, the Mitsubishi Corp. and MMC. We think the volume production of batteries will start in the second half of 2008-09 business year so we would like to start selling in the market by 2010. The electric vehicle is already pretty much developed. Since there's no big obstacle left in bringing it to the market, we're developing it with a view that first sales are in sight.
So aside from diesels and electric vehicles, you're not planning a Prius- type hybrid to challenge Toyota and Honda?
Commercializing such a hybrid is not in our plan.
Meantime, you have the amazing new Lancer Evolution coming.
Yes, the new Evo will launch this autumn. I drove it three weeks ago. It's turned into a really exciting car, different from previous models. Even though the price hasn't been announced, we've already heard many would like to buy it. This Lancer Evolution X (Ten) is a flagship car for MMC, like the Pajero. We're looking forward to delivering it to customers.
'Evo' is such a hot name. Is there any truth to the rumor that Mitsubishi is working on new Evo performance brand to create, for instance, an Evolution Colt?
We're not thinking of such a development.
Turning now to Japan, car sales continue to slump and the market seems especially tough right now. How do you think the market can be revived?
Rather than being tough, there are structural issues: Japan's declining birthrate, the graying elder generation and young Japanese who are not buying cars. Total demand is falling due to matters like these. The population in three main areas (Tokyo, Nagoya and Kansai, mainly in Osaka) is increasing. There's still demand for cars in local areas but sales in big cities are in a slump. It's difficult to deal with structural problems like this. So now we've come to an era when the car should be developed thinking about the Japanese lifestyle.
Where are Mitsubishi's best markets now?
Roughly speaking, Europe, including the Ukraine and Russia. Also the Middle East, South America, Africa and Australia are in good shape. China is also an important market where demand is growing rapidly. Generally, markets that have natural resources are growing, which means we have to make continual efforts to increase sales in such markets.
What about your operations in Australia? Any plans for a 380 successor?
We launched the 380 in Australia in October 2005 when the price of oil started to climb and the large car market shrunk. We're making every effort to increase sales of the 380 however in actual fact it's difficult to sell such a large car in the Australian market. On the other hand, vehicles imported from Japan and Thailand are selling very well due to the favorable Australian economy.
So are you going to continue 380 production in Australia until 2010 or beyond and then begin manufacturing a successor?
What we need to do right now is to sell as many 380s as possible. In order to do that, we have facelifted the car and strengthened its marketability. We're not ready yet to consider about a successor.
The 380 and the viability of your Australian plant go hand in hand. Can I just be sure about the future of the plant, whether you will keep it open or not, as this issue is always in the media?
Regarding the plant, we are now trying our best to continue production there.
Switching to brand strategy, what are the key strengths of the Mitsubishi brand? What is Mitsubishi, exactly?
I assume everyone has the Pajero, Lancer Evolution X in mind. Mitsubishi is good at four-wheel-drive, SUVs, durability, driving ability and so on with technologies gained through many years of competing in rallies. From now on, Mitsubishi will further build up safety and fun so customers would appreciate it.
How often do you visit the U.S.?
Usually three times a year, including visiting the Detroit Auto Show.
Lastly, what do you see as your biggest threat as president? What keeps you awake at night?
Rivals exist, of course, and technology will progress faster when rivals are involved. So we don't feel they are a threat. That cannot be helped. The biggest issue for automakers including MMC and people across the globe is the environment. There's no one trump card. We need to challenge across a number of fronts, including gasoline, diesel and hybrid. Each has its own weakness. How to deal with the environment over the coming years is a hurdle for all automakers. At the same time, demand for low-cost cars is rising. With the environment, naturally there's cost involved. So how to meet and balance both issues is the matter at hand.
About the author
Peter Nunn is a Tokyo-based automotive writer. Originally from the U.K., moving to Japan in 1988, he reports on the Japanese auto industry for media outlets in North America, Japan, Europe and Australia.
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Best regards and I wish Mr Masuko all the best for Mitsubishi from iMitsubishi.blogspot.com
