SAN FRANCISCO -- For the line workers and foremen at Mitsubishi's beleaguered assembly plant in Illinois, an economic crisis in Russia is hitting close to home.
Mitsubishi designed the factory in Normal, Ill., to build 240,000 vehicles a year, but it now produces only about 70,000 Outlander Sport crossovers, with roughly half of those sold in the U.S. Its largest export market is Russia, where falling oil prices and international tensions have pushed the economy into recession and sent vehicle sales into a tailspin.
"That is creating tremendous challenges for us," Don Swearingen, executive vice president at Mitsubishi Motors North America, said in an interview last week.
Mitsubishi spends $250 million a year on labor, tooling and other fixed costs to operate the Normal plant before a single vehicle rolls off the line, Swearingen said. Russia's recession is causing those costs to be spread across a smaller number of vehicles, hurting Mitsubishi, which narrowly turned a North American profit in fiscal 2014 for the first time since the fiscal year that ended March 31, 2007.
In the past, Mitsubishi might have responded by inking fleet deals with bulk buyers such as Hertz and Enterprise Rent-A-Car for little or no profit. But Swearingen is convinced that fleet deals hurt car companies and customers by eroding resale values.
"The executive team [at the factory] would love for me to call and tell them that I need 10,000 more vehicles," Swearingen said at a media event here for the Outlander crossover, which, unlike the Outlander Sport, is made in Japan. "But it's not good for us and it's not good for our customers."
Until a few years ago, Mitsubishi relied on fleet sales to keep the Illinois factory humming. Mitsubishi used to build the Galant midsize sedan there, and at one point, about half of Galants sold in the U.S. were pumped into the fleet market, the company said at the media event.
In fiscal 2011, about 25 percent of Mitsubishi's U.S. sales went to fleet buyers, the company said, adding that by fiscal 2014, the share fell to 8 percent. Swearingen vows to hold the line at 10 percent, no matter what happens in Russia.
"I'm not going to sell a car to lose money," Swear-ingen said. "That was the old days."