Mitsubishi group companies vowed yesterday to stick by struggling Mitsubishi Motors after Daimler-Chrysler said it had given up on the auto maker and would try to sell its 37 percent stake.
The decision by the German-American company, which took even Mitsubishi Motors by sur-prise, left its strategy to become a global car maker in disarray and threw the future of the money-losing Japanese firm into doubt.
PHOTO: AFP
DaimlerChyrsler said on Thursday it would not participate in a rescue capital increase planned by Mitsubishi Motors Corp (MMC) because it could not agree on an acceptable deal with other shareholders in the Mitsubishi group.
It also said it would not provide any further financial support to Mitsubishi, the only unprofitable carmaker in Japan.
But three Mitsubishi group firms -- Mitsubishi Heavy Industries, Mitsubishi Corp and Bank of Tokyo-Mitsubishi -- said they would continue to support the company.
The three hold a combined 23 percent stake in MMC.
A DaimlerChrysler spokesman in Germany said the company's stake in Mitsubishi Motors would be booked as discontinued business until a buyer could be found.
"This clearly means separation," the spokesman said.
The decision was reached at an extraordinary meeting of the DaimlerChrysler supervisory and management boards on Thursday and just two weeks after chief executive Juergen Schrempp defended his global strategy in front of angry shareholders.
Mitsubishi had been expected to seek shareholder approval on April 30 for a ?700 billion (US$6.39 billion) bailout.
Sources and media had said DaimlerChrysler would fund more than half of that, with plans to consolidate the Japanese company into its books within a few years. Mitsubishi group firms were expected to provide more than ?100 billion.
Mitsubishi Motors said it was evaluating the situation and that chief executive Rolf Eckrodt was in touch with DaimlerChrysler and Mitsubishi group companies.
"The move will leave Mitsubishi Motors with no choice but to shrink its business operations," said Hajime Yagi, a general manager at Meiji Dresdner Asset Manage-ment in Tokyo.
Reeling from losses on easy-term car loans in the US, the maker of the Pajero sport utility vehicle is expecting a net loss of ?72 billion for the 12 months to March 31.
It had a profit of ?37.36 billion the previous year.
Mitsubishi Motors' net automotive debt stood at around ?726 billion six months ago, while total interest-bearing debt was ?1.141 trillion.
"This could be the end for Mitsubishi if nobody else injects fresh capital," one industry source said.
Japanese government officials also expressed concern.
DaimlerChrysler bought the stake in Mitsubishi over three years ago with a view to expanding in Asia, and the decision to cut its losses will intensify pressure on Schrempp, who faced calls to resign at the annual shareholder meeting on April 7.
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