LAS VEGAS - Mitsubishi Motors Corp., widely viewed as a merger candidate because of its slipping market position and fragile financials, appears to be in talks with a potential partner.
Asked in an interview here last week whether he was in active merger talks with anyone, Mitsubishi President Katsuhiko Kawasoe pointedly did not refuse comment or deny the possibility.
'I wished you had not asked that question,' Kawasoe said. 'This is a top-secret area, so I am not able to speak frankly.'
Rumors have linked Mitsubishi, Japan's No. 4 carmaker, with Ford Motor Co., Fiat Auto S.p.A. and DaimlerChrysler. Fiat and DaimlerChrysler have sizable commercial-vehicle units that would complement Mitsubishi's heavy-vehicle operations, and Fiat and Mitsubishi are collaborating on a sport-utility.
Also, because of Ford's acquisition of Volvo Car Corp., Mitsubishi now has a tie to the U.S. company through NedCar, a Mitsubishi-Volvo joint venture in the Netherlands.
NOT FOR SALE
But Kawasoe stressed that Mitsubishi is not for sale, in the sense of being a takeover candidate. Rather, he said, Mitsubishi is paying 'close attention' to the kind of tie-up Nissan Motor Co. has forged with France's Renault SA.
Renault in March injected about $5 billion into Nissan in return for a 36.8 percent stake and effective control of Nissan's restructuring. Under their arrangement, the two companies have swapped senior and mid-level executives, and Nissan has agreed to acquire a reciprocal stake in Renault.
That kind of partnership appeals to Mitsubishi for both its passenger car unit and the Mitsubishi Fuso heavy-truck operations, Kawasoe said.
'If an offer is meaningful, and offered an equal partnership, we could consider a close tie-up relationship with someone or a cross-ownership of shares,' he said.
Although Kawasoe admitted to being 'skeptical' about the meshing of corporate cultures that such a tie-up would bring, he said that Mitsubishi has more experience than most in that arena, given its past equity partnership with Chrysler Corp. in the 1980s.
However, Kawasoe stressed that Mitsubishi's first priority is 'streamlining, restructuring and profitability first ... then we may proceed with a possible wide-ranging tie-up.'
PLANT CANNOT COMPETE
Those restructuring efforts are beginning to come into play, including the cutting of 1,700 U.S. manufacturing and sales jobs, 1,200 jobs in Thailand and the probable closure of Mitsubishi's Australian manufacturing plant.
Because the Australian operation no longer can compete with cheaper imports from Japan, '... it will be necessary to drastically restructure our operations there,' Kawasoe said, making it clear that he meant a shutdown.
The Australian shutdown and the job losses in the United States and Thailand are part of a $3.5 billion cost-cutting program that includes cutting platforms from 12 to six, and the number of models from 24 to 14 by 2004.
Already the cost reductions are ahead of target, Mitsubishi executives say.
By reducing head count, overtime, logistics and warranty costs at its Normal, Ill., plant, Mitsubishi has saved nearly $100 million in the past two years.
Inventories at the U.S. sales arm have been cut from a monthly average of 27,000 units in 1998 to 13,000 for the first half of 1999, yielding a 55 percent reduction in holding costs. Port inventories at the Illinois plant have been cut from 10,000 units in December to about 2,000 now. In-process inventory at the plant has been cut from 700 units to 250.
For its two high-volume products, material reduction and purchased component costs have been reduced by $1,750 per unit for the current Galant compared to its predecessor, and $1,550 for the 2000 Eclipse compared with the current model.
At the U.S. sales arm, warranty costs for the entire model line are down 46 percent, including 50 percent less for the Galant. Incentives and subvention cost per unit has decreased by 8 percent. And revenues are up 20 percent.
The program has begun paying dividends. For the fiscal year ended March 31, Mitsubishi Motors posted a worldwide operating profit of $462 million - up $436 million from a year earlier - and net income of $47 million, vs. a loss of $841 million a year earlier.
But the better earnings came largely from cost-cutting and extraordinary gains - revenue slipped 6 percent to $28.9 billion as vehicle sales fell.
For the 2000 fiscal year beginning next April 1, the company says it expects a minimum of $165 million in net profit on sales of $33 billion, and a reduction of interest-bearing liabilities to $10.7 billion.
At the annual U.S. dealer meeting here, Mitsubishi executives disclosed several other developments:
Mitsubishi will bring its gasoline direct-injection technology to America in 2002. Because most gasoline in America has too high a sulfur content for gasoline direct injection to work properly, the introduction will be limited to a small fleet of Galants in California, where the gas is cleaner, said Akira Kajima, vice corporate general manager of the passenger car r&d center.
The company is cutting hours-per-vehicle production time at the Illinois plant from 39 hours to 31. That is still well above the industry average of 25 hours per vehicle, however, and the competitive segment average of 18-20 hours per vehicle.
'First time through' vehicles not needing repairs at the end of the Illinois assembly line have increased from the low-40 percent range in December to the high-70s this month, with a goal of 90 percent in January.
For Kawasoe, the effort to get leaner and nimbler is job one. Everything else will flow from that, he said.
'Restructuring is the first thing we need to do,' he said. 'But if the condition of having an equal partnership would be kept, I would be ready to talk about that.'