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Mitsubishi Motors cuts jobs, closes plant, secures funding in 'last chance' reorganization

Updated:
TOKYO (AP) _ Japanese automaker Mitsubishi Motors Corp., struggling to survive, said Friday it will cut nearly 11,000 jobs, or 22 percent of its global work force, close an assembly plant in Japan and receive a $4 billion infusion from investors.

Under what it called the ``last chance'' plan, Mitsubishi Motors will keep open its U.S. plant in Normal, Ill., but will shutter an engine plant in Australia while keeping a passenger car plant there. The company will close a passenger car plant in Okazaki in fiscal 2006.

The automaker, burdened with more than 1 trillion yen ($9 billion) in debt, plunging car sales and a spate of recalls, also reported a much steeper-than-expected loss of $1.9 billion for the fiscal year ended March 31.

The automaker had been dealt a serious blow by a surprise announcement last month by U.S.-German automaker DaimlerChrysler that it would not provide a fresh cash infusion. Its image has been damaged by recurring defect cover-ups that began four years ago.

``This is our last chance to continue as an automaker,'' said Mitsubishi Motors CEO Yoichiro Okazaki.

Shares of Mitsubishi Motors rose nearly 3 percent to close at 240 yen ($2) on the Tokyo Stock Exchange shortly before the revival plan and earnings were announced.

Standing before a packed room of reporters at Tokyo headquarters, Okazaki also apologized and bowed deeply to the families of the two people who had died in 2002 accidents, suspected of being linked to defects in wheels and clutches of Mitsubishi trucks, resulting in thousands of vehicles being recalled this year.

The proposed job cuts will reduce Mitsubishi's global work force to 38,200 by April 2007 from the current 49,100, officials said. Mitsubishi, which employs workers in factories and offices in Japan, the United States, Europe and Australia, did not give a regional breakdown of the job cuts.

Under the plan, DaimlerChrysler's stake in Mitsubishi Motors will be diluted to 22 percent to 23 percent from the current 37 percent, but officials said alliance projects will continue, such as the joint development of small cars and engines.

The top shareholder will be investment fund Phoenix Capital, which is affiliated with the Mitsubishi group, at about 40 percent. The Mitsubishi conglomerate, which includes Mitsubishi Heavy Industries, trading company Mitsubishi Corp. and Bank of Tokyo-Mitsubishi, is also contributing money to the revival plan.

Also Friday, Mitsubishi Motors said it had fallen deeper into the red than its forecast for the fiscal year ended March 31, posting a net loss of 215 billion yen ($1.9 billion), a reversal from a 37 billion yen profit the previous year, partly because of massive losses from buyers with bad credit in North America. Sales totaled 2.5 trillion yen ($22 billion), down 35 percent from 3.9 trillion the previous year.

The loss was nearly triple the 72 billion yen loss it forecast in February.

Mitsubishi Motors expects another loss this year but aims to return to profitability by the fiscal year ending March 2006. In the year ending in March 2007, the company is targeting a net profit of 70 billion yen ($625 million) on sales of 2.49 trillion yen ($22 billion).

Yasuaki Iwamoto, auto analyst with Okasan Securities Co. in Tokyo, said the planned closure of the Okazaki plant was a good sign the automaker may be serious about cutting costs.

``But the test of whether the company can really motivate its people to carry out the goals still lies ahead,'' he said. ``It's a question of how well it can actually carry out the plan.''
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