TOKYO - Mitsubishi Motors Corp. said last week it had to inject another $350 million into its two troubled U.S. subsidiaries in June, just two months after spending $350 million to cover earlier losses.
With the latest injection, the third in two years, Mitsubishi has pumped nearly $1 billion into its U.S. operations. Last year, Mitsubishi also took a special charge of ¥32.6 billion, or about $283 million at current exchange rates, to cover losses at Mitsubishi Motor Manufacturing of America Inc., its factory in Normal, Ill.
In April, Mitsubishi forecast that its two U.S. units would return to profitability this year after a 1996 loss of $300 million for the sales operation and $50 million for the manufacturing plant.
But Mitsubishi now projects that only Mitsubishi Motor Manufacturing of America will be profitable this year, a company spokesman said. The sales arm is not expected to return to the black until 1998, he said.
'It's an absolute flipping disaster,' said Matthew Ruddick, Tokyo-based auto analyst for James Capel Pacific Ltd. 'In the space of 21/2 years, ¥110 billion has been injected into the U.S., and they're still losing money.'
Now, he added, the company's forecasts of profits in the United States are suspect. 'If you can't make money at the peak of the market, what will happen when things go down?' he asked.
Mitsubishi's forecast assumes U.S. sales will rise 12 percent this year. But through June, U.S. sales are up only 0.4 percent to 94,635.
'With less product, and less competitive products, than its competitors, the tendency will still be to discount,' Ruddick said. Discounts and costly subsidized leases have been blamed for much of the sales arm's losses.
The maker also has far fewer sales points than its principal competitors, meaning its advertising reach is stretched that much thinner. As of Jan. 1, the company had 515 U.S. dealerships compared to 1,189 for Toyota and 1,086 for Nissan.
Cumulative losses at Mitsubishi Motor Manufacturing of America, since the unit began production as Diamond-Star Motors in 1987, totaled $920 million through May, nearly equal to its capitalization of $940 million.
Cumulative losses at the sales unit, since it began operations in 1982, came to $780 million, against a capitalization of $800 million.
The sales arm went into the red after 1990, while the manufacturing plant has lost money since 1993, the spokesman said.
Of the latest $350 million payment, $250 million will cover losses at the sales arm and $100 million will cover losses at the factory.
The money was transferred to the subsidiaries on June 30. A spokesman did not say why news of the latest injection was released almost a month later.
But Ruddick raised the possibility of a cover-up. 'There is the concern that they appear to have lied about (the extent of the losses) and tried to cover it up,' he said. 'They knew precisely what was going on in April.'
A spokesman for the U.S. sales operation declined to comment on the cash injection, referring all questions to Japan.