Mitsubishi turns profitable with a lift from Outlander

TOKYO — North America isn't Mitsubishi's biggest market, nor its most profitable. But the surprise success of the redesigned Outlander in the U.S. is propelling the struggling Japanese company back to profitability as its new hero nameplate.

Mitsubishi Motors Corp. CFO Koji Ikeya cited the Outlander as a key factor in the manufacturer's earnings surge in the October-December quarter when announcing financial results last week.

North American retail sales galloped ahead in the quarter to 40,000 vehicles, from 24,000 the year before, as Mitsubishi cashed in on the popularity of its redesigned Outlander crossover.

Sporting rugged off-road styling and riding on a shared platform developed by alliance partner Nissan Motor Co. for the Rogue crossover, the fourth-generation Outlander went on sale last spring.

A plug-in hybrid version is expected in the second half of this year.

North American regional sales of the Outlander more than doubled over the first nine months of the year to 39,300, Ikeya said. And in the October-December quarter, U.S. sales more than tripled to 13,209, accounting for more than half of the brand's volume there.

Mitsubishi executives said the company was able to raise the price of the revamped Outlander by about 10 percent over the outgoing model, while cutting incentive spending by half.

According to data from Motor Intelligence, spiff spending on the Outlander plunged by 65 percent to $1,838 in the October-December quarter, from $5,251 the year before.

The cutback helped drive down Mitsubishi's overall incentives some 59 percent in the quarter.

The healthier business aided Mitsubishi in booking a ¥6.5 billion ($56.5 million) regional operating profit in North America for the fiscal third quarter ended Dec. 31, reversing a regional loss a year earlier. North America still trailed Mitsubishi's Southeast Asia region in profits and sales.

"The new Outlander sales have remained strong, and we saw a significant increase in Outlander sales this year compared with a year earlier," Ikeya said. "We have also curbed our incentives for other models and have been working to improve our profitability."

In the October-December quarter, Mitsubishi was the third-fastest-growing brand in the U.S., notching a 68 percent sales increase and trailing only Genesis and Tesla.

But things aren't completely rosy for the Mitsubishi Outlander.

Despite the sales surge, the nameplate still ranked at the bottom of the U.S. midsize crossover segment in full-year sales. In the latest quarter, however, it showed an uptick, finishing midpack, ahead of such rivals as the Nissan Pathfinder and Honda Passport.

Ikeya warned of supply constraints due to the global semiconductor shortage. To maximize profitability, Mitsubishi is counting on a more disciplined marketing strategy.

"We have raised our sales prices globally as we have marketed good products," he said. "Although chip shortages have affected some models, we have focused on producing models that are relatively less affected and have been moving nimbly to capture demand."

In Japan, where the new Outlander PHEV went on sale in December, the company has received 9,000 orders for the vehicle, and customers are waiting five months for delivery. Mitsubishi sells only the plug-in hybrid version in Japan, where acceptance of hybrids is higher than in the U.S. Mitsubishi blamed order delays partly on microchip bottlenecks.

The automaker also upgraded its full fiscal year earnings outlook, thanks to stricter control over sales expenses and a lift from favorable exchange rates.

It now expects to rebound from a big operating loss in the previous fiscal year to a ¥70 billion ($608.2 million) operating profit in the current fiscal year. That's up from an earlier target of $503.9 million. Net income will also recover to $434.4 million, higher than Mitsubishi's earlier forecast for $347.5 million, compared with a loss last year.

Mitsubishi sees its global retail sales increasing 15 percent to 921,000 vehicles this fiscal year.

Naoto Okamura contributed to this report.