Mitsubishi ahead of midterm targets for car sales and profit margin, COO says

Trevor Mann: "That is our responsibility — to return the company to profit with our own efforts, with the assistance of the alliance."

It has been a year and a half since Nissan took a controlling stake in Mitsubishi and installed hard-charging British executive Trevor Mann as its chief operating officer. Last October, the new management team presented an interim growth plan that targets increased vehicle sales, revenue and profits as the automaker shifts Mitsubishi models onto platforms used by the Renault-Nissan alliance. Mann is already seeing positive results, he told Automotive News Europe Correspondent Nick Gibbs.

How embedded is Mitsubishi in the Renault-Nissan alliance now?

First and foremost, we have got a job to do on ourselves. We are committed to a three-year midterm growth plan announced last year. That is our responsibility — to return the company to profit with our own efforts, with the assistance of the alliance.

One of your big priorities was to get finances in order. How is that going?

We are completely on track in terms of the midterm plan. We plan to go from about 1 million vehicle sales to 1.3 million globally. We also aim to increase our revenue by 30 percent and return to a 6 percent margin. We are ahead of the profit target [Mitsubishi's margin was 4.5 percent in its 2017 fiscal year, which ended March 31]. We are also ahead of the volume target at 1.1 million [for the 2017 fiscal year]. Overall, I'm quite pleased. We are doing well.

You have stayed profitable, right?

Even though we originally forecast a loss [for the 2016 fiscal year] after the crisis [Mitsubishi was embroiled in a mileage manipulation scandal], we didn't make a loss for the full year.

Where will the sales growth come from?

The top countries are obvious: China and the U.S. In China we grew 44 percent in the fiscal year to the end of March, 8 percent in the U.S. and 8 percent in Europe, including Russia. We have also grown 33 percent in ASEAN countries [including Indonesia, Thailand and the Philippines].

And the future profits?

China and the U.S., because we were relatively underperforming in both, and they are the world’s biggest markets. Next we said was the ASEAN region. We are quite profitable there, and we have got a very good brand equity.

What would it take for you to restart car production in the U.S.?

First we would need to create a critical mass in terms of volume. At the moment we are selling 120,000 in the U.S. based over three or four models. We don't have that critical mass needed for localization. We have a job to do in terms of building a presence.

What is the critical-mass figure you target to consider local production in a market such as Europe?

About 80,000 units per model, but the question is: Would you build a factory for one model? The answer may be no, but this is potentially where the alliance could come in. We could build one of our products in an alliance plant if there was capacity available. The problem is that we don't have a single vehicle that accounts for 80,000 sales in Europe. We are 30,000 to 40,0000 per model. In China, however, we have localized the Outlander. We are doing 10,000 a month there. We built a factory in Indonesia and launched the Xpander [minivan]. We are going to push to 100,000 units. That justifies the investment.

Is it fair to say that in places such as Europe and the U.S., you would only ever build cars locally in Nissan or Renault plants?

It could be in a Nissan or Renault plant.

Would you ever have another stand-alone factory in the U.S.?

It depends on the product. As Mr. [Carlos] Ghosn has mentioned many times, what we need to do is to make sure we are using the assets of the alliance.

In terms of future model cadence, what could get to 80,000 in the U.S.?

I think all of our SUVs can, should and will get to 80,000 when you consider it's a market of 16 to 17 million units annually that is swinging heavily toward SUVs.

U.S. President Donald Trump has talked about raising import tariffs. Does it make sense to localize below 80,000 when tariffs are involved?

We do in some countries around the world where we sell below 80,000. For example, in some ASEAN countries, we have local manufacturing on a CKD [complete knockdown] production, with a certain level of localization. From my previous experience of being in charge of manufacturing and supply chain, a tariff would need to be above 35 percent to make CKD worth it. You have got to overcome the cost of setting up the plant as well as the packaging and logistics costs of individual parts.

You have previously spoken about possibly rebranding Renault vehicles for ASEAN markets. Will that happen?

Those types of things remain under study. We have about 30 cross-company teams between Mitsubishi and other alliance partners studying how we can help each other do business. It’s a two-way thing. Some things under study are obvious — for example, LCVs [light commercial vehicles].

When will we see a Mitsubishi on an alliance platform?

What we have agreed on so far is that we are converging the CMF-C platform, which underpins the Nissan X-Trail, Renault Kadjar and others. The next Outlander will be on CMF-C. Then we are looking to converge on CMF-B. That would be for smaller vehicles, so the ASX [small SUV] replacement. But the Outlander is coming first. I won't say when.

You just launched the Eclipse Cross compact SUV. Is that the last Mitsubishi on a legacy platform?

I would rephrase that. You haven't seen the last Mitsubishi. We will continue to make Mitsubishi cars with the heritage and what people expect.

Roughly 70 percent to 80 percent of your European sales are SUVs. You still offer the Mirage/Space Star minicar. Will that stay? What does it do for you?

What it does is give us an entry vehicle into the brand. And it's a [positive] CO2 contributor. Obviously, we are reviewing the long-term product plan, but it's an important contributor into the brand.

Would a future electric vehicle take over that CO2 role?

Yes, and our midterm business plan [which promises "at least" two electric vehicles after 2020, including a small car for Japan] gives our direction. We are giving the 2019 Outlander plug-in hybrid an upgrade to boost speed and power. And we will produce more plug-in hybrid versions of the larger vehicles, with smaller vehicles going EV.

What about diesel? In the UK, Mitsubishi was mulling not having a diesel version of the new Eclipse Cross. Could that expand across Europe?

Although the market is in decline, average diesel sales are still 44 percent. Mitsubishi's are 22 percent, so we are at 50 percent of the exposure compared with the average manufacturer. We have decided to focus on our [updated] Outlander plug-in hybrid because if people have worries about diesel, what we are saying is we have got a no-compromises alternative.

So are you going to stop selling diesels in Europe?

We are monitoring the very short term and planning our future. We have believed in electrification for a long time. In 2008, we were the first with the i-MiEV [electric minicar], and we were first with a plug-in hybrid with the Outlander.

We have seen how sensitive plug-in hybrids are to local tax changes — for example in the Netherlands. What is your prognosis for that sector in Europe?

The world is changing in a number of ways. Some of that is by policy, some of it is by anti-diesel sentiment. What we are seeing with anti-diesel sentiment is that total cost of ownership has increased as diesel residual values have dropped by 5 percent. That gives us the opportunity to look at our price positioning and see who our competitors are.

You can reach Nick Gibbs at ngibbs@crain.com.