Mitsubishi's Rich Gilligan: Open to opportunities for the Normal, Ill., plant.
Mitsubishi Motors Corp. has no plans to restore a second shift at the company's sole U.S. plant. But the factory in Normal, Ill., is gamely trying to break the cycle of falling volume and other woes that have plagued it for years.
Normal has suffered from almost every problem an assembly plant can face.
It has never operated at full capacity. In 1996, the company was hit with a sexual harassment lawsuit filed on behalf of 350 current and former female workers at the UAW-organized plant. The company paid a record $36 million settlement two years later, on top of a $10 million settlement of a private lawsuit.
Normal's quality was so bad that Mitsubishi had to recall every car it built from the 1994 to 1999 model years. In its first 10 years, Normal lost approximately $100 million each year.
In addition, assorted problems at its parent slashed demand for Mitsubishi vehicles built at Normal. It underwent repeated restructurings and job cuts. In October, it cut back to a single shift. Its production last year, 113,280, was the lowest since it began building cars in 1989.
There are plenty of reasons to worry about Normal's future. In April, for example, the plant built its last Chrysler Sebring and Dodge Stratus coupes. That ended an arrangement going back to the plant's origins.
Chryslers have accounted for one-third of the plant's total production since it opened. Normal will be hard-pressed to make up for that lost volume.
Still, it is trying.
Mitsubishi's initial hopes rest on the redesigned Eclipse coupe. Initial orders are well ahead of expectations. To keep up with demand, Normal plans to speed up its assembly line to build 1,000 cars a week by the end of this summer, compared with 760 a week now. A redesigned Eclipse Spyder, the convertible version, will follow in time to go on sale in the spring.
The plant also is looking to export markets.
Mitsubishi plans to export about 15,000 cars a year from Normal to the Middle East and eastern Europe, including Russia and the Ukraine, starting in the 2006 model year.
Mitsubishi also is looking at possible exports to Latin America. "We will pursue any and all opportunities," says Rich Gilligan, CEO of Mitsubishi Motors North America Inc.
Gilligan managed the Normal plant until he was promoted to CEO of Mitsubishi's North American unit in January.
There are no plans "at this point" to build cars for other automakers at Normal, Gilligan says. Mitsubishi weighed the possibility of building Volvos at Normal in 1998.
Could Normal build cars for other companies in the future?
"Obviously, we listen to any possibilities," Gilligan says.
One of Normal's strengths is its flexibility, he adds. The plant this year has built four Mitsubishi models on the same line: the Endeavor SUV, Galant sedan, Eclipse coupe and Eclipse Spyder convertible. Including the Chrysler models, it built six until March.
Nonetheless, it is too soon to think about going back to two shifts.
If Mitsubishi needs more cars, Normal can raise capacity to "upward of 140,000" through a single nine-hour shift, overtime and Saturday work, Gilligan says. "It would take a sustained demand for Mitsubishi to make a commitment to a second shift," he says.
Gilligan knows a thing or two about staying flexible and looking for the positive in trying circumstances.
As plant manager, he led a 1999 restructuring of Normal's operations. Gilligan was brought in from Ford Motor Co. to cure the plant's inefficiencies, improve its product quality, reorganize management and stop its 10-year flow of red ink. Among other actions, he yanked out some of the plant's robots that installed hoods, trunk lids and tailgates. The robots had been slowing production.
The effort ensured that the plant can be profitable on one shift, with volumes of 130,000 to 135,000 a year, he says.
Dedicated as Diamond-Star Motors Corp. in October 1988, the factory began building cars in 1989. It was owned equally by Mitsubishi and Chrysler then. Chrysler sold its stake in the plant to Mitsubishi in 1991.
In its first decade, the Normal plant's problems were often self-inflicted ones, such as quality, workplace turmoil and inefficiencies. But in the last five years, the overriding problems have been the result of troubles at parent Mitsubishi Motors that led to falling sales.
In early 2003, it looked as if the efforts to turn around the parent company were working. DaimlerChrysler AG had bought a controlling 37 percent stake in Mitsubishi. Rolf Eckrodt became Mitsubishi's CEO. He was on track in his drive to cut costs, capacity and head count.
In the United States, sales had jumped to a 2002 peak of 345,111. An aggressive marketing campaign dubbed "0-0-0" powered sales. It offered no money down, zero-percent interest and no loan payments for a year.
Output at Normal was rising. In January 2003, the plant added the U.S.-designed Endeavor SUV, its first entry into the fast-growing light-truck segment. It used the Galant platform, saving costs and increasing the number of common components used at Normal.
Emboldened by the growth, Mitsubishi planned to sell 500,000 vehicles a year in North America. The company envisioned sales of at least 100,000 Galants, 80,000 to 85,000 Endeavors and 75,000 of the two Eclipse models from the Normal plant.
To support the projected growth, Mitsubishi planned to expand Normal. In April 2003, work began on a $200 million expansion that would raise Normal's capacity by 60,000, or 25 percent, to 300,000.
Mitsubishi also considered three other options: adding yet more capacity at Normal, adding a second plant in America or having Mitsubishi cars built at a DaimlerChrysler plant in North America.
Then the balloon burst.
Many 0-0-0 customers, when the bills came due a year after they drove off the dealership lot with a new Mitsubishi, couldn't make the payments. In the face of high repossession rates, Mitsubishi had to tighten its loan standards. Sales tumbled.
In its financial results for the year ending March 31, 2003, Mitsubishi had to book a $300 million charge to cover credit losses from 0-0-0.
Meanwhile, a recall scandal decimated sales in Japan. A year later, DaimlerChrysler decided not to pour more money into another Mitsubishi bailout and withdrew from the alliance.
Mitsubishi had expected to build 260,000 cars at Normal in 2003, up from 202,611 in 2002. Instead, it built 173,699. That included 27,916 Chrysler cars in 2002 and 27,388 in 2003. The company canceled the factory expansion plans.
Now Normal is aiming to stabilize its operations. Expansion can wait.
You may e-mail James B. Treece at [email protected]