Mitsubishi to Restructure Strategy
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Mitsubishi to Restructure Strategy

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Alejandro Enríquez By Alejandro Enríquez | Journalist and Industry Analyst - Tue, 07/28/2020 - 14:20

Following Mitsubishi’s 2Q20 results, the company's shares faced a 13 percent down to hit a record low on Tuesday, Reuters reported. The company forecasted its second straight year of losses stemming from the COVID-19 pandemic. "To pave the way to recovery, the top priority of all executives is to share a sense of crisis with employees to execute cost reductions," said CEO Takeo Kato to the media. 

Mitsubishi is the sixth-largest automaker in Japan and announced an operating loss of ¥140 billion (US$1.33billion) for the year that ends in March 2021. According to Reuters, this is the biggest loss the company has suffered in 18 years. Among the company's strategies is to shrink its workforce and production, including the closure of dealerships and manufacturing plants. The target is to reduce fixed costs by 20 percent within two years. 

One of the first steps in the company's strategy is to take Pajero SUV out of the roads and closing the Japanese plant that manufactures it. To assure liquidity, Mitsubishi would not pay dividends in 2020. 

The company is part of the Renault-Nissan-Mitsubishi Alliance, which recently announced a renewed strategy to strengthen its cooperation while increasing profitability and competitiveness. The three automakers will undergo a leader-follower scheme in which the leaders in certain segments will be supported by the other companies. "The leader-follower scheme is expected to deliver model investment reduction up to 40 percent for vehicles fully under the scheme," said the Alliance on a statement. 

Mitsubishi Motors was appointed to focus on the North African, ASEAN and Oceania markets, while leading the development of PHEV for C/D segments. Accordingly, as the 2Q20 results were presented, Mitsubishi announced it would reduce its presence in Europe and North America to focus on Asia. Particularly, the company has bet on Indonesia, Philippines, Thailand and Vietnam to grow. The southeast Asian region represents a quarter of the company's global sales, which in 2Q20 fell 68 percent to contribute only a 17 percent to its total global sales of 139,000 vehicles.

“ASEAN was meant to be its growth driver and was even positioned as its key attractive point to the Renault-Nissan Alliance. ASEAN sales have collapsed and it is now generating losses,” Mio Kato, Lightstream Research analyst said in a note to clients, Reuters reported.

In Mexico, Mitsubishi ranks 19 in sales, with 15,738 units sold in 2019. It is behind premium brands such as BMW (18th) and Mercedes-Benz (17th). The company reached its highest sales peak in 2007 with 17,666 units sold, while its lowest sales number was registered in 2012 with 8,753 units sold. During 1H20 the company has sold 5,005 units, 43.5 percent less than in 1H19.

Photo by:   Image by Tomasz Mikołajczyk from Pixabay

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