Mitsubishi said it remained committed to selling cars in the U.S.
As proof of that, the source said, Mitsubishi plans to bring a sedan version of the Mirage compact hatchback to the U.S. next spring, followed by its Outlander PHEV plug-in hybrid SUV within a year. The next-generation Outlander Sport arrives after that.
“Our exit from Normal is based solely on circumstances which includes small production volume, insufficient U.S. sales and the evaporation of the Russian export market, which has resulted in our being one of the smallest mass-brand auto production plant in North America,” Mitsubishi said in its statement to dealers. “This was not an easy decision to make, and we are sad to exit Normal. But it is a necessary thing to do, and to do this year.”
The decision to end production comes at a critical juncture for the carmaker.
In April, Mitsubishi said it booked its first full-year North America operating profit in seven years, as the company’s long-struggling U.S. business gradually stages a rebound. But the plant’s output has since been broadsided by plunging demand in its top export market, Russia.
Japan’s Nikkei news service reported on July 24 that Mitsubishi planned to cease production at the Normal plant as part of a strategic shift to the growing Asian market.
Mitsubishi said it was working with the UAW, which represents the plant’s workers, to find a buyer.
Some analysts questioned the wisdom of ending U.S. output.
“Mitsubishi has struggled to grow U.S. sales for several years, and its limited product portfolio means many buyers never seriously consider the brand,” said Karl Brauer, a senior analyst at Kelley Blue Book.
“It’s hard to imagine how moving production out of the U.S. benefits the Japanese automaker from a cost or logistical perspective. Is Mitsubishi looking to grow, or even maintain, its presence in the U.S. car market? Ending production in Illinois doesn’t support either goal.”
Through June, Mitsubishi’s U.S. sales soared 25 percent to 49,554 vehicles, lifted mainly by a 17 percent increase in sales of its Outlander Sport compact crossover, the only vehicle made at the Normal plant. Outlander Sport sales totaled 17,893 vehicles for the first six months, or 36 percent of the company’s U.S. sales.
Despite Mitsubishi’s return to profit in North America, the brand’s sales are still paltry, and its Normal plant faces substantial handicaps. Total one-shift production capacity is 120,000 vehicles a year, but the factory built just 64,000 vehicles in the company’s latest fiscal year ended March 31.
As recently as 2000, the factory was churning out 222,000 vehicles a year.
Bearish on Russia
The recession in Russia has undercut demand for the plant’s export production. Last year, the plant exported 29,000 vehicles, with 17,000 going to Russia, Kazakhstan and Ukraine, the company said.
Last month, Don Swearingen, executive vice president at Mitsubishi Motors North America, said the unraveling exports are creating “tremendous challenges.” Mitsubishi spends $250 million a year on labor, tooling and other fixed costs to run the Normal plant before a single vehicle rolls off the line, he said. Russia’s recession spreads the costs across a smaller number of vehicles.
In the past, Mitsubishi relied on fleet sales to keep the Illinois factory humming. But Swearingen said Mitsubishi has sworn off such habits and won’t hike its money-losing fleet sales.
Finding a buyer for the plant will pose challenges. Mitsubishi may hope to catch the eye of rivals looking to expand as the U.S. auto market surges to its highest level in years.
But the plant is a quarter-century old and has the dubious distinction of being the only Japanese-owned U.S. auto factory whose hourly workers are represented by the UAW. The union local’s current contract expires in August.
Mitsubishi CEO Osamu Masuko repeatedly has said he has no plans to abandon U.S. sales, as Suzuki Motor Corp. did.
Suzuki had denied any intention of pulling out, right up until its November 2012 announcement that it would do so. But signs had been building for years. And Mitsubishi’s recent history in the U.S. mirrors some of Suzuki’s path.
Suzuki’s sales tumbled after the Great Recession and were further hurt by a dearth of new product. Its number of U.S. franchises nearly fell by half in just four years. And just before its deep dive, it decided to stop manufacturing cars in North America.
In late 2009, Suzuki sold its stake in its only North American assembly plant to General Motors. Suzuki and GM opened the jointly owned CAMI plant in Ingersoll, Ontario, in 1986.
Mitsubishi opened its Illinois plant in 1988 as a joint venture with then-partner Chrysler.