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Last Updated: Friday, 21 May, 2004, 07:40 GMT 08:40 UK
Mitsubishi wins $4bn bailout deal
Mitsubishi showroom
Mitsubishi cars have been selling poorly
Ailing car giant Mitsubishi Motors has negotiated a 450bn yen ($4bn) rescue package with Japanese and US investors.

The firm's new backers are US bank JP Morgan Chase, Tokyo-based investment fund Phoenix Capital, and other Mitsubishi Group companies.

Mitsubishi said it would use the cash to fund an overhaul aimed at returning it to profitability next year.

The restructuring exercise will involve the loss of some 11,000 jobs, or 22% of its global workforce.

Mitsubishi said it would also close manufacturing plants in Japan and Australia, and "adjust" its production in the US.

New beginnings

The deal throws a lifeline to the debt-ridden carmaker, which has faced an uncertain future since its biggest shareholder, DaimlerChrysler, withdrew financial support last month.

MITSUBISHI MIRED
Japan's fourth biggest, and only unprofitable, carmaker
45,000 employees
Car factories in Japan, Australia, the Netherlands, the Philippines, Thailand and the US
Models include Pajero, Colt, Galant and Lancer
Market value down by $44bn since 1998
Disastrous 'easy credit' US sales campaign
Net loss of $1.9bn in the year to March
Mitsubishi chief executive Yoichiro Okazaki said the firm faced collapse if the restructuring measures did not work.

"This is our last chance for survival as an auto maker," he told a news conference.

Details of the rescue package came as the firm unveiled a net loss of 215bn yen ($1.9bn) for the year to March, sharply higher than the 72bn yen it forecast in February.

The figure partly reflects a disastrous performance from Mitsubishi's US car finance division, which handed out cheap loans in an effort to boost sales, but then found that many customers were unable to make their repayments.

Challenge

The company also had to fund recall programmes at its truck division after discovering that some vehicles had design flaws that may have caused fatal accidents.

This is a car company with a terrible reputation in terms of quality
Marc Desmidt, Merrill Lynch Investment Managers

The episode has caused grave damage to Mitsubishi's public image.

Analysts warned that turning Mitsubishi around would be no easy task.

"This is a car company with a terrible reputation in terms of quality, and it lacks a coherent strategy," said Marc Desmidt at Merrill Lynch Investment Managers.

"It remains to be seen if they can put one together."

Under the rescue deal, Mitsubishi will issue shares worth 170 billion yen to JP Morgan and Phoenix Capital.

Other Mitsubishi group companies will buy a further 140 billion yen of stock, while banks belonging to the Mitsubishi Tokyo Financial Group will swap about 130 billion yen of the carmaker's debt for shares.




WATCH AND LISTEN
The BBC's Chiyo Robertson
"Mitsubishi is banking on the backing of key shareholders"



SEE ALSO:
Former Mitsubishi bosses arrested
06 May 04  |  Business
Mitsubishi seeks new rescue plan
30 Apr 04  |  Business
DaimlerChrysler board mulls fate
29 Apr 04  |  Business
DaimlerChrysler dumps Mitsubishi
23 Apr 04  |  Business
Mitsubishi confirms share plans
14 Apr 04  |  Business
Mitsubishi ditches sales chief
02 Apr 04  |  Business
New Colt lifts Mitsubishi's gloom
11 Mar 04  |  Business


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