As if the headaches at Mitsubishi werent bad enough, now comes word from Japan that the automaker has too many outlets in North America and must close some dealerships.
Officials at the home office in Tokyo now realize that Mitsubishi tried to grow too quickly in the United States, using wild incentives and easy credit in the same way that some athletes use steroids to unnaturally accelerate muscle development.
The plan worked for a while. Sales grew quickly. But the collapse will mean more pain to Mitsubishis troubled U.S. dealer group.
How many dealerships are enough or too much?
Doing the math can be scary.
Osamu Masuko, the managing director in charge of overseas operations at Mitsubishi Motors Corp., says the company has enough dealers 637 at the beginning of the year to sell 500,000 vehicles a year. But the way things are going, theyre likely to sell only 185,000 this year. The target was 233,000.
Clearly, whacking half the companys outlets would be too drastic because it would cripple the companys ability for natural growth as the brands image is restored. That deep of a cut might improve company and dealer profits, but it would make Mitsubishi a perpetual also-ran.
Last year, Mitsubishi dealerships each sold an average of just 401 vehicles last year, a drop of more than 160 units from levels set in 2002 and 2001. At the current rate, that would mean a drop of another 100 units this year, to less than 300 sales per unit. Thats hardly enough to keep dealers profitable and happy. So some dealers may want to bail out.
Establishing the ideal number and locations for Mitsubishi dealerships most likely can be done by a formula. Its something CEO Finbarr ONeill and his staffers at Mitsubishi Motors North America probably already have figured out.
It was clear that something like this had to happen.
But how to accomplish the surgery with as little pain as possible is another matter.