Mitsubishi: Cut in N.A., freeze in Europe

TOKYO -- Mitsubishi Motors Corp. will freeze new product development for Europe and slash fixed costs in North America as part of a strategy to return to profitability in the next fiscal year after the Japanese carmaker booked its fourth-straight quarter of net losses.

The move could result in an eventual withdrawal from Europe, as Mitsubishi’s existing vehicles are no longer able to meet regional emissions regulations there, co-COO Yoichiro Yatabe said during the company’s fiscal first-quarter earnings announcement last week.

For North America, Yatabe cited marketing and advertising expenses as areas ripe for cost reduction as the company cuts back on selling expenses in less profitable markets. Mitsubishi’s North American business has posted five consecutive quarters of regional operating losses.

The downsizing comes as Mitsubishi repositions itself around its Southeast Asian stronghold under a new midterm business plan called Small but Beautiful. The goal is to chop global fixed costs 20 percent through the fiscal year ending March 31, 2022. Doing so should restore a thin profit in the next fiscal year and put Mitsubishi on a path for an operating profit margin of 2.3 percent in the fiscal year ending March 31, 2023 and 6 percent in the fiscal year ending March 31, 2026.

In the fiscal first quarter ended June 30, Mitsubishi slumped to an operating loss of ¥53.3 billion ($496.3 million) and tumbled to a net loss of $1.64 billion.

Profits evaporated as the COVID-19 pandemic wiped out sales. But the company was already in a downward trajectory when the global health crisis hit. Mitsubishi’s global sales plunged 53 percent to 139,000 vehicles in the April-June period. North American sales tumbled 60 percent to 17,000 vehicles, while European volume slid 48 percent to 30,000.

Mitsubishi says it is reeling from ballooning fixed costs that accumulated during the company’s bid to expand sales in virtually every global market under its previous business plan.

The new approach calls for “selection and concentration” in a bid to focus the carmaker’s limited resources on the products and regions where it is strong. That means trying to shore up results in markets such as North America, Europe and China while leaning on Southeast Asia, Australia, South America, the Middle East and Africa as the main growth drivers going ahead.