Mitsubishi Motors Corporation - Company Profile, Information, Business Description, History, Background Information on Mitsubishi Motors Corporation

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Company Perspectives:

Approaching the 21st century, the business environment surrounding the auto industry is expected to grow increasingly difficult. Notwithstanding, the company is focused on continuing to grow and develop into an all-around automotive corporate group through the deployment of new technologies that anticipate the needs of the age, the development of products that stand apart from those of the competition and the building up of a worldwide organization with a truly global perspective.

History of Mitsubishi Motors Corporation

Mitsubishi Motors Corporation is one of Japan's largest auto manufacturing companies, with a line of automobiles that includes the Diamante luxury sedan, the midsize Galant sedan, the GTO3000 sports car, and the compact Eclipse. As of 1998 the company also sold trucks, buses, and automobile engines. In 1997 approximately 60 percent of the cars produced by Mitsubishi were sold inside Japan. In addition to several plants in Japan, Mitsubishi also maintained plants in 31 countries worldwide, including the United States, Puerto Rico, Denmark, Germany, Portugal, Australia, New Zealand, Thailand, the Philippines, Indonesia, and the Netherlands. International joint ventures included the Malaysian-built Proton Saga and a car built in conjunction with Volvo and the government of the Netherlands, called the Netherlands Car.

Early History

Mitsubishi Motors was formed as a wholly owned subsidiary of Mitsubishi Heavy Industries (MHI) in 1970. MHI is the modern incarnation of Mitsubishi Shipbuilding Co. Ltd., which had begun manufacturing automobiles as early as 1917. As the sprawling network of companies under the Mitsubishi umbrella grew in the early part of the century, the Mitsubishi Internal Combustion Engine Co., Ltd. was established in 1920 to manufacture engines for airplanes. This company's name was changed to Mitsubishi Aircraft Co. in 1928. MHI was created in 1934 upon the merger of Mitsubishi Shipbuilding and Mitsubishi Aircraft. After the breakup of the Japanese conglomerates known as zaibatsu following World War II, use of the corporate name Mitsubishi was banned for several years. MHI was chopped into three regional sections with the names East Japan Heavy Industries, Central Japan Heavy Industries, and West Japan Heavy Industries. Eventually the forbidden name began to reappear, and in 1964 MHI was reintegrated out of its three fragments. By 1967, MHI's Motor Vehicle Division was producing about 75,000 cars a year. That division was spun off as an independent company in 1970, creating Mitsubishi Motors Corporation. Tomio Kubo, a successful engineer from MHI's aircraft operation, was placed in charge of the new company.

An important part of Kubo's early strategy was to build up the company's volume by emphasizing exports. This was to be done by making connections with well-established foreign companies. Mitsubishi's longstanding association with the Chrysler Corporation began the following year, when Chrysler purchased 15 percent of the company's stock. MHI retained the other 85 percent interest. By 1971, the company was producing 260,000 cars a year. Chrysler quickly began to market Mitsubishi-built cars in the United States. The most important of these was the subcompact sold in the United States as the Dodge Colt and Plymouth Arrow. At home in Japan, Mitsubishi concentrated on producing cars for special niche markets. Among the more successful of these models were the Lancer and the Celeste.

By 1973, annual production had reached 500,000 vehicles. That year, the Mitsubishi Motor Sale Financing Corporation was created to handle financing for the company's domestic sales. Although sales began to stall somewhat at that point due to the oil crisis, the introduction of the Galant in 1976 gave the company a welcome boost. As Mitsubishi's sales in the United States grew, friction began to arise between the company and its American affiliate Chrysler. Company officials felt that Chrysler demanded too much say in Mitsubishi decisions, and the idea of marketing its own cars in the United States gained support. By 1977, Mitsubishi had begun to set up its own collection of Colt dealerships across Europe. Tensions between Mitsubishi and Chrysler grew further around that time, as the two companies began competing head to head in the subcompact car market.

As U.S. automakers began making smaller cars, Chrysler unveiled the Omni hatchback, a model aimed at the same market as Mitsubishi's latest Colt model, sold in Japan as the Mirage. In spite of the disagreements, the two companies continued to cooperate, with Chrysler marketing Mitsubishi's cars in the United States and Mitsubishi contributing its advanced engineering know-how to Chrysler. For 1978, Mitsubishi sold a total of 965,300 units, a 17 percent increase over the previous year. Of those, 534,600 were sold in Japan, a 20 percent increase.

The 1980s: Increasing Foreign Sales

Mitsubishi's annual production passed the one million mark in 1980. That year, Mitsubishi Motors teamed up with the Mitsubishi Corporation to purchase Chrysler Australia, subsequently renaming it Mitsubishi Motors Australia Ltd. By 1981, the company had captured eight percent of the Japanese auto market, running neck and neck with Mazda behind industry leaders Toyota and Nissan. Mitsubishi entered the American automobile market under its own name for the first time in 1982. Three models were initially made available to American buyers, all of them fairly upscale: the Starion, a $12,000, turbo-charged sports car; the $7,000 Cordia sedan; and a family sedan called the Tredia, priced at around $6,500. Mitsubishi also began to sell small pickup trucks in the United States, offering vehicles under its own name identical to those already being sold by Chrysler. Under import restraints on Japanese cars, the 30,000 Mitsubishi vehicles sold in 1982 had to come out of Chrysler's annual allotment of around 120,000 cars. Seventy dealers in 22 U.S. markets sold the Mitsubishi line that year.

While the company was making its foray into the U.S. market, sales at home began to sag. In 1983 a new president, Toyoo Tate, was brought in to try to reverse this trend. Tate's early moves included personnel changes in the executive offices, along with a renewed push for more international alliances. One important new connection made was with South Korea's Hyundai Motor Co., of which Mitsubishi purchased a 7.5 percent interest. By 1984 the company's revenue had reached ¥1.17 trillion. During that year, Mitsubishi Motor Sales, a separate corporation that handled domestic auto sales, was absorbed into Mitsubishi Motors.

In 1985 Mitsubishi and Chrysler launched a joint venture called Diamond-Star Motors Corp., named after the corporate logos of the two companies. The twin central Illinois towns of Bloomington and Normal were chosen as the site of the Diamond-Star plant, which was to produce a line of subcompact cars using engines and transmissions imported from Mitsubishi's Japanese facilities. For Mitsubishi, the venture provided a guaranteed source of cars to sell in the United States, the largest automobile market in the world, regardless of any restrictive trade measures that might be enacted by either country involved. By 1987, the company was selling 67,000 cars a year in the United States.

Mitsubishi Motors went public in 1988, ending its status as the only one of Japan's 11 auto manufacturers to be privately held. To pave the way for the shift to public ownership, changes had to be made in the company's stock agreements with both MHI and Chrysler. MHI agreed to reduce its share to 25 percent, retaining its position as largest single stockholder. Chrysler meanwhile increased its holding to over 20 percent. The $470 million in capital raised by the ten percent initial offering enabled Mitsubishi to pay off part of its debt as well as to expand its investments throughout Southeast Asia, where by now it was operating in the Philippines, Malaysia, and Thailand.

Toward the end of the 1980s, Mitsubishi initiated a major push to beef up its presence in the U.S. market. While Japan's quotas allowed the company to export 193,000 cars a year to the United States, two-thirds of those cars were marketed by Chrysler in 1988. In 1989 Mitsubishi pumped its U.S. sales goal up to 130,000 cars, and attacked this goal from several angles. First the company made plans to increase its U.S. dealer network by 40 percent, up to 340 dealers. Mitsubishi also aired its first national television advertising campaign. The company also began to further exploit its relationship with Hyundai, importing the Precis, a carbon copy of Hyundai's popular Excel. Diamond-Star began to pay off with the production of the Eclipse, a sporty car sold by Chrysler as the Plymouth Laser. For 1989, Mitsubishi's worldwide production, including its overseas affiliates, reached 1.5 million units.

Hirokazu Nakamura became president of Mitsubishi in 1989 and steered the company in some promising directions. Sales of the company's sport utility vehicle (SUV), the Pajero, were bucking conventional wisdom by becoming popular even in the crowded streets of Japan. Although sales of SUVs and light trucks were booming in the United States, Japan's car manufacturers dismissed the idea that such a trend could occur in their own country. Nakamura, however, increased the budget for sport utility product development at Mitsubishi. His gamble paid off; Mitsubishi's wide line of four-wheel drive vehicles, ranging from the Pajero Mini to the large Delica Space Gear, rode a wave of SUV-buying in Japan in the early to mid-1990s. Narrowly following Toyota in SUV market share in Japan, Mitsubishi saw its overall domestic market share rise to 11.6 percent in 1995.

U.S. and Southeast Asian Alliances in the 1990s

Nakamura also urged greater reliance on Mitsubishi's ties to southeast Asian companies and markets. Mitsubishi had entered the region in the 1970s by using the contacts of Mitsubishi Corporation, a trading company that was part of the informal Mitsubishi group of companies. By the mid-1990s, Mitsubishi Motors counted major alliances in Malaysia, South Korea, and Thailand. Proton, the joint venture between Mitsubishi and Malaysia, controlled 75 percent of the Malasian market. Mitsubishi maintained a presence in South Korea with their 6.7 percent stake in Hyundai Motor Co. and supplied 50 percent of Taiwan's vans and trucks by sending kits to China Motor Corp. In addition, the company owned 48 percent of Thailand's MMC Sittipol, which produced Mitsubishi vehicles and exported parts to the Philippines, Malaysia, and Canada.

With almost 25 percent of the truck and car market in southeast Asia, Mitsubishi's fortunes rose with their booming economies. Approximately 30 percent of Mitsubishi's profits came from its Asian alliances in the mid-1990s. In addition, by moving their production to these countries, Mitsubishi lessened the negative effect of the rising yen. In 1995 the company moved its truck production from Japan to Thailand, which brought the percentage of its production in low-wage countries to 20 percent.

Mitsubishi's thrust into the United States continued into the 1990s. In 1991 the company added a number of models to its line at a time when U.S. companies were delaying their new models and laying off workers due to sluggish sales. Among Mitsubishi's new products was the Diamante luxury sedan. The Diamante, with a price tag of $28,000, was the winner of that year's prestigious Japan's Car of the Year award. Part of Mitsubishi's strategy to increase its American market share was to target buyers who were already likely to purchase Japanese or European cars, and offer its vehicles at prices slightly lower than comparable cars in other companies' lines.

Mitsubishi gained another outlet for its cars in 1991 with the acquisition of Value Rent-A-Car. In addition, the company began producing two minivans that year, the Expo and the Expo LRV. Later in 1991, Mitsubishi bought out Chrysler's share of Diamond-Star for around $100 million, with Mitsubishi assuming all of Diamond-Star's debt. The two companies continued to split the operation's output. By this time, Chrysler's interest in Mitsubishi had fallen to about 11 percent. Of the 322,500 Mitsubishi-made vehicles sold in the United States in 1991, 187,500 were marketed under the company's own name. 1991 also brought the preliminary stages of a joint venture with Volvo Car Corporation and the government of the Netherlands to produce cars in that country.

Mitsubishi sold 176,900 vehicles in the United States in 1992, over seven percent less than the company's 1990 peak. Although company profits declined somewhat for that year, Mitsubishi's performance was considerably better than that of its Japanese competitors, all of whom suffered dramatic drops in sales in the face of a weak global economy. Mitsubishi's results were aided by strong sales of its recreational models such as the Pajero, whose sales leaped by 52 percent in the first half of the fiscal year. The company continued to outpace its fellow Japanese automakers going into 1993. With 10.7 percent of the domestic market in hand, Mitsubishi bucked another trend by spinning off a new model at a time when the other manufacturers were condensing their lines. Focusing on the lower end of the market, Mitsubishi unveiled a new two-door version of the Mirage, to be sold in Japan as the Mirage Asti. The Asti's price of about $8,500 was well below the company's previous bottom end, the $11,430 Mirage four-door sedan. For the fiscal year ending in March of 1993, Mitsubishi's profits declined by 7.9 percent, a modest drop for one of the Japanese auto industry's worst years ever. Foreign exchange losses caused by a rapidly rising yen were blamed for much of the decline.

As all of the Japanese companies continued to lose market share in the United States in 1993, Mitsubishi attempted to gain a foothold in the family sedan market with the introduction of a newly redesigned Galant midsize sedan. The Galant was to be produced in the United States at the company's Normal, Illinois, plant, creating two advantages: assembling it in the United States avoided the inflated price tag the soaring yen would cause; and the Illinois plant, previously operating at only half of capacity, needed the work.

After decreasing its interest in Mitsubishi to less than three percent in 1992, Chrysler announced its decision in 1993 to sell off all of its remaining Mitsubishi shares on the open market. The two companies stated that they would nevertheless continue their close alliance, with Chrysler supplying engines and transmissions for Mitsubishi's Diamond-Star operation, and Mitsubishi marketing Chrysler products in Japan.

Challenges in the Late 1990s

Mitsubishi's image was negatively impacted in the United States in the mid-1990s with the filing of two lawsuits alleging sexual harassment. The first suit, filed by 29 women in December 1994, accused Mitsubishi of fostering a climate of sexual harassment at its Normal, Illinois, plant. Then, in April 1996 the Equal Employment Opportunity Commission filed a class action suit on behalf of approximately 300 women who worked at the Normal plant. The company initially denied any problem at its plant but later hired former U.S. Labor Secretary Lynn Martin to recommend changes to its policies and practices. In August 1997 Mitsubishi settled the 1994 suit for $9.5 million; the EEOC was still pursuing its suit into the late 1990s.

The benefits Mitsubishi had seen because of its strong presence in Southeast Asia reversed themselves in the late 1990s. The economic crisis in the region, which began in 1997, spelled big trouble for Mitsubishi. In September 1997 the company closed its Thai factory in response to a crash in the country's currency and the plummeting of consumer demand. The large truck plant, which had produced 8,700 trucks in 1996, was shut down indefinitely. In addition, Mitsubishi had little support from sales in Japan, which slowed considerably throughout 1997 and were affected by that country's own economic uncertainty into 1998. Other Japanese auto makers, such as Toyota and Honda, bolstered their own slipping domestic sales with booming sales in the United States. However, with only a small percentage of the market in the United States, Mitsubishi stood to be gravely hurt by the turmoil in the Asian economies in the late 1990s.

Principal Subsidiaries: Mitsubishi Motor Manufacturing of America Inc.; Mitsubishi Fuso Truck of America, Inc.; Mitsubishi Motors America, Inc.; Mitsubishi Motor Sales of Caribbean Inc. (Puerto Rico); Mitsubishi Motors New Zealand Ltd.; Mitsubishi Motors Europe B.V. (Netherlands); Mitsubishi Motor Sales of America, Inc.; Mitsubishi Trucks Europe, S.A. (Portugal); Philippine Automotive Manufacturing Corporation (50%); Mitsubishi Motors Australia Ltd. (50%); Mitsubishi Motors de Portugal S.A. (50%); PT Mitsubishi Krama Yudha Motors and Manufacturing (Indonesia; 49%); MMC Sittipol Company, Ltd. (Thailand; 48%).

Additional Details

Further Reference

Annin, Peter, and John McCormick, "More Than a Tune-Up," Newsweek, November 24, 1997, pp. 50-52.Armstrong, Larry, "Mitsubishi Is Souping Up Its Image," Business Week, February 27, 1989, p. 56.Cullison, A.E., "Mitsubishi Eyes Own US Sales Team," Journal of Commerce, April 13, 1977, p. 3.Dodsworth, Terry, "Living with Chrysler," Financial Times, November 10, 1977, p. 27.Furukawa, Tsukasa, "Mitsubishi to Retain Amiable Relationship with Chrysler, It Says," American Metal Market, July 5, 1993, p. 8.Holusha, John, "Mitsubishi's U.S. Car Venture," New York Times, October 26, 1982, p. D3.Kanabayashi, Masayoshi, "Japan's Battered Auto Makers Adopt Mixed Outlook for the Current Year," Wall Street Journal, June 1, 1993, p. A9B.Levin, Doron, "Chrysler Corp., Mitsubishi Set Site for Plant," Wall Street Journal, October 8, 1985, p. 2.------, "Mitsubishi's Big Campaign in U.S.," New York Times, April 30, 1991, p. D1.Maskery, Mary Ann, "Japan Niche Prompts a 2nd Mirage," Automotive News, May 17, 1993.------, "Mitsubishi Sets Sights on Mazda in U.S.," Automotive News, September 21, 1992, p. 21.------, "Mitsubishi to Sell Stock in Auto Firm," Automotive News, October 31, 1988, p. 4.Miller, Krystal, "Mitsubishi Restyles Galant to Anchor Line," Wall Street Journal, June 23, 1993, p. B1."Mitsubishi Motors Posts 27% Decline in 1st-Half Profit," Wall Street Journal, November 6, 1992, p. A5A.Morris, Kathleen, "Endgame," Financial World, August 1, 1995, pp. 2-33.Shirouzu, Norihiko, "Japan's Firms Revamp Amid Asian Crisis," Wall Street Journal, November 6, 1997, p. A18.Updike, Edith, and Laxmi Nakarmi, "A Movable Feast for Mitsubishi," Business Week, August 28, 1995, pp. 50-51.

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