TOKYO – Mitsubishi Motors Corp. CEO Takao Kato defended executive pay cuts in order to “share the pain” as the loss-making Japanese carmaker embarks on a massive cost-reduction push.
Speaking Thursday at the company’s annual shareholders’ meeting, Kato deflected an investor suggestion that he mitigate the compensation cutbacks so executives would have more cash to spend and help stimulate an economy still reeling from the pandemic slowdown.
After warning that the company would post a full-year net loss, Mitsubishi said in April that executives would have their pay cut almost in half. Base compensation to representative executive officers, executive officers and corporate officers will be slashed by 20 percent to 30 percent in the fiscal year started April 1 and performance-based pay will be eliminated.
The total hit amounts to around a 45 percent reduction, Kato said at the time.
The company’s shareholder meeting was held almost entirely online -- only 20 shareholders showed up in person amid precautions to prevent transmission of COVID-19. Mitsubishi encouraged people not to attend and truncated the usual hours-long event to under 60 minutes. Every company official wore a mask, including Kato, who kept it on while giving his presentation.
One attendee took issue with the executive pay cuts, saying Mitsubishi should reconsider them to help boost the economy. But Kato pushed back, saying: “I think we all need to share the pain.”
Kato, who took office last year, noted that line workers took a 10 percent pay cut when Mitsubishi had to temporarily suspend production at its Japanese plants due to slumping demand.
Kato warned that the company is gearing up for more belt-tightening.
Mitsubishi aims to cut global fixed costs by 20 percent -- to the tune of 100 billion yen ($927.6 million) -- through the fiscal year ending March 31, 2022. “We will start implementing these cost reduction measures as soon as possible,” he said. “We will cut costs in a variety of areas including capital expenditure, R&D, advertisement, indirect labor in general expenses to reduce fixed costs.”
Mitsubishi’s roadmap, dubbed “Selection and Concentration,” calls for a doubling down on regions where Mitsubishi already has momentum, such as Southeast Asia, and scaling back in others. Kato said the company’s previous strategy of expanding into so-called “mega-markets” such as Europe and China over-extended the company and saddled it with unsustainable costs.
“Even though we increased sales volume in the mega markets, we have not yet achieved the level of profit we expected,” Kato said. “We aim to increase sales in the regions where we can offer our core products. We will gradually reduce our commitment to mega markets.”
Product development, he said, will be refocused on the kinds of vehicles that sell well in Southeast Asia -- pickups, truck-based SUVs and MPVs. He didn’t mention sedans or small cars.
Under a new strategy to avoid overlap with alliance partners Nissan and Renault, Mitsubishi will take the lead in the Southeast Asian and Oceania markets. It will also spearhead the alliance’s product development efforts in large-size, plug-in hybrid vehicles.
Mitsubishi swung to a net loss of 25.8 billion yen ($239.3 million) and reported an 89 percent tumble in operating profit to 12.8 billion yen ($118.7 million) in the fiscal year ended March 31. Revenue declined 10 percent, as global retail sales fell 9 percent to 1.13 million vehicles.