From Automotive News:
Mitsubishi dealt blows by S&P, insurance companies
Reuters / June 21, 2004
TOKYO -- Ailing Mitsubishi Motors Corp. took a fresh beating Monday when a ratings agency said the company's existence was in question and Japanese insurance companies said they may demand compensation for damages they had paid on company's cars.
Credit rating agency Standard & Poor's cut its rating on Mitsubishi's bonds deeper into junk territory, down to CCC+ from B-, with a negative outlook, after Japan's fourth-largest automaker revealed more safety defects.
"Recent disclosures of additional safety defects -- which have led to further damage to MMC's already weak brand image and plummeting domestic sales -- call into question MMC's viability," S&P credit analyst Chizuko Satsukawa said in a report.
"It is increasingly unclear whether pending operational and financial restructuring measures will be sufficient to ensure MMC's survival," she said.
The scandal-plagued automaker only last week announced additional cost cuts for its month-old revival plan after evidence of past defect coverups surfaced at Mitsubishi and its truck affiliate, further damaging already-weak domestic sales.
It was already facing a shaky future despite a $4 billion rescue package announced May 21 -- which did not include aid from 37 percent-owner DaimlerChrysler AG. The German-U.S. auto giant had already given up on Mitsubishi's rehabilitation.
Exacerbating financial woes for Japan's only loss-making automaker, insurance companies said Monday that they were reviewing their records and may seek compensation if accidents involving Mitsubishi's vehicles were found to have been caused by defective parts. "We have embarked on a review with the aim of exercising our right to compensation," said Takaki Yamaguchi, spokesman for Mitsui Sumitomo Insurance Co.
Sompo Japan Insurance also said it was conducting a review. The insurance companies said, however, that this was normal procedure following revelations of possible defects.
"One significant fear is a rash of court cases that just drags out this PR
nightmare and doesn't let this company get on with rebuilding its image," said auto analyst Kurt Sanger of ING.
Mitsubishi said last week that it would do more to slash costs, such as cutting employee salaries and foregoing retirement allowances for executives, as well as executing deeper reductions in marketing, development and other costs.
Through these steps, Mitsubishi aims to slash another $314.4 million in costs in the business year to next March and $352 million next year, for total additional savings of $669 million.
It had originally earmarked cost cuts of $507 million this year and $903 million next year.