Mitsubishi Motors Corp. has told its U.S. dealers that its captive finance company started posting profits in April after suffering huge losses last year.
Now Mitsubishi Motors Credit of America is trying to be more flexible with consumer loans, which pleases dealers.
Much of the loss was due to a financing offer that included 0 percent interest, no money down and no payments for a year. The program caused huge losses in 2003, and the company tightened its credit policies.
Junji Nishihata, spokesman for Mitsubishi Motors Corp., says the tighter policies caused the percentage of top-rated A-tier customers to rise from 61 percent in 2002 to 82 percent in the first half of 2004. In the same period, he says the number of B- and C-tier customers declined more than 50 percent.
Nishihata says the finance company is selling high-risk subprime loans to an unnamed third party, and that the company no longer offers balloon and deferred loans.
Some dealers have charged that the tightened credit policies have hurt sales. Mitsubishi's sales were down 35.8 percent for the first 10 months of the year.
Dottie Diemer, vice president of public relations for Mitsubishi Motors North America, says the company is being more flexible when it comes to credit decisions. She said previous decisions were solely determined by an automated program. Now the company has added staff so that dealers can appeal credit applications that have been declined.
Al Gossett, owner of Gossett Mitsubishi in Memphis, Tenn., says dealers can miss sales when customers with lower-tier credit are rejected. But he says Mitsubishi is on the right track.
"As the credit company regains strength, we hope they can become more competitive," he says. "But I hope they never get out of line again and try to buy everything."
Mitsubishi also has signed a letter of intent with an unnamed major financial U.S. institution that it will name this year. Under the partnership, the automaker plans to reduce the cost of its loans to its dealers and customers.
Mitsubishi took a charge for loan losses of $299.5 million in the fiscal year ending March 31, 2003. It took another charge of $454.8 million for loan losses in the first half of the next fiscal year.
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