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Mitsubishi keeps 2004-05 outlook despite sales slide

From Automotive News:

Mitsubishi keeps 2004-05 outlook despite sales slide

Reuters / August 04, 2004

TOKYO -- Mitsubishi Motors Corp. (MMC) kept its full-year loss forecast intact on Wednesday even though a widely publicized recall scandal sent sales in the key U.S. and Japanese markets skidding further than anticipated.

Announcing first-quarter sales and profit figures, Japan's only loss-making carmaker said domestic sales sank 38 percent to 49,000 vehicles during the three months to June 30, leaving it a long way from its 300,000-unit target for the year.

North American sales skidded 30 percent to 53,000 cars, drowning out a rise in European sales by 5,000 units to 58,000 and a 4,000-unit increase in Asia and the rest of the world.

"There are very big question marks over how domestic and North American vehicle sales are going to perform in the second and third quarters," said Koji Endo, auto analyst at Credit Suisse First Boston.

"Are vehicle sales going to fall below Mitsubishi's own internal targets and are cost cuts going to be able to set that off? On balance, I think they will end up having to revise their full-year earnings forecast down."

MMC conceded that North American sales could fall as much as 21 percent short of its 233,000-unit target for the year ending next March as it pulls back unprofitable sales to fleet customers and reins in profit-eroding sales incentives.

MMC also restated its June view that Japanese sales could undershoot its target by 80,000 vehicles, which it said would would reduce operating profit by 30 billion yen ($271.1 million).

"We think we can meet (sales of 220,000 units)," Chief Financial Officer Hiizu Ichikawa told a news conference. "But it's also true that we haven't seen a bottoming out of sales at this point, and it's hard to say how things will pan out."

Despite the bleak sales prospects, MMC said it still expected to limit its net loss to 230 billion yen ($2.08 billion) for the year to next March by offsetting a drop in sales and damage from a weaker dollar with a reduction in material and other costs.

ROCKY ROAD TO RECOVERY

Debt-ridden MMC is facing a shaky future after DaimlerChrysler AG gave up on its revival in April, leaving its partner to scrape together cash from other Mitsubishi group firms and investment funds such as Phoenix Capital.

Having managed to secure a total $4.5 billion last month to repay its debt, develop new models and pay for restructuring measures, MMC has promised to return to profit in the business year starting next April.

CFO Ichikawa said MMC hoped to raise at least another 100 billion yen in the longer term from the state-backed Development Bank of Japan and other sources to help pay for restructuring and financial support to its dealers.

But the road to recovery remains rocky as MMC fails to shake off consumers' distrust in its brand.

Revelations that MMC and its unlisted truck affiliate Mitsubishi Fuso Truck and Bus Corp had been hiding defects to prevent official product recalls cut MMC's car sales in Japan by more than 50 percent in each of the last three months.

In April-June, MMC had an operating loss of 31.71 billion yen, equivalent to a quarter of its full-year loss forecast of 120 billion. That was 10.6 billion better than the year before, when it booked losses from loan defaults in North America.

First-quarter net loss came to 54.69 billion yen, worse than 51.14 billion the year before, hit by losses for restructuring costs in Australia and the cancellation of the development of a new model.

Interest-bearing debt fell by 329 billion yen during the quarter to 733.7 billion yen.

Shares in Japan's fourth-largest automaker have been marking new lows almost daily during the past week, reaching 72 yen at one point on Wednesday before ending at 76 yen, down 3.8 percent.

That is a fraction of this year's high of 350 yen reached in April and much lower than the 100 yen per share paid by Tokyo-based Phoenix Capital last month for its 33 percent stake.
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