TOKYO -- Mitsubishi Motors Corp. forecast on Monday a sharp slowdown in profit growth this year, warning of an earnings drop in the key U.S. market and a long haul before it breaks even at home.
Japan's fourth-largest automaker, owned 37 percent by DaimlerChrysler AG, said it expected group operating profit to rise 8.7 percent to 90 billion yen ($770 million) in the year to next March, in line with analysts' forecasts.
The restructuring automaker reported operating profit growth of 106 percent in the just-completed financial year.
"Life will not be so easy," Chief Executive Officer Rolf Eckrodt told a news conference. "Mitsubishi Motors will face another challenging year."
The earnings for last year include those at its overseas subsidiaries over the past 15 months due to a change in accounting periods. The forecasts for this year exclude the Fuso truck unit, which was spun off in January.
Excluding the accounting changes and the spin-off of the truck unit, operating profit at Mitsubishi was forecast to rise 7.1 percent.
Eckrodt said Mitsubishi was undergoing a wholesale revision of the way it did business in the United States after it realised that its youthful customer base contained a significant percentage that did not pay their bills.
The automaker said it has changed top management at its finance unit, is focusing on credit-worthy clients and is stepping up debt recollection after it had to book a special 36 billion yen credit loss in the last business year.
Mitsubishi's U.S. sales have been one of its few sources of profit in the past few years and analysts have voiced concern over its recent slide in sales.
The automaker said while it hoped to maintain last year's sales level on a retail basis, sales on a wholesale basis were likely to drop by 30,000 units or nine percent because of inventory adjustment.
"Instead of volume, we are going for quality of business," Eckrodt said.
Entry into the Canadian and Mexican markets will, however, boost North American vehicle retail sales to 370,000 units from 347,000.
Now in the final year of a three-year turnaround plan, Mitsubishi aims to lessen its dependence on the United States by strengthening its domestic operations. But sales in Japan have fallen due to a lack of new models and a tarnished brand image after a massive recall three years ago.
In the past business year, vehicle sales fell by some 50,000 units to 354,000 units. "This is very sad. I think we reached a real bottom," Eckrodt said.
Mitsubishi said that while it expected retail sales in Japan to increase by some 46,000 units this year, it would be another two years before the company broke even in its home market.
On a brighter note, Eckrodt said he expected vehicle sales to increase in Asia and that European operations would turn a profit.
For the year ended in March, operating profit more than doubled to 83 billion yen while net profit more than tripled to a record 37 billion yen, thanks to cost cuts and robust sales overseas.
The results mirrored revised estimates announced a month ago. Sales grew 21.4 percent to 3.88 trillion yen, 433 billion yen of which came from the overseas units' longer accounting period.
The automaker expects a net profit of 40 billion yen this year on sales of 2.9 trillion yen.
Investors said that Mitsubishi's lack of financial muscle meant the company would continue to be a stock market wallflower.
"Mitsubishi, although seeing progress in restructuring plans, is still expensive," said Hisanori Kuroda, fund manager at Asahi Life Asset Management Co Ltd. "We are still avoiding Mitsubishi Motors Corp."