* Company seeks capital reorganisation
* To reduce capital stock, clear $9 bln of accumulated
* Also proposes 10-for-1 reverse stock split
* Shares close up 2.5 pct
By Yoko Kubota
TOKYO, May 24 Mitsubishi Motors Corp,
the Japanese maker of Triton pickups, the Outlander Sport SUV
and i-MiEV electric car, wants shareholders to approve a capital
reorganisation to clear more than $9 billion of accumulated
losses, and pave the way for the resumption of dividends after a
The measures are a big step for Osamu Masuko, who joined the
troubled automaker a decade ago as it reeled from a scandal with
its then-president and others implicated for systemically
covering up safety defects.
Since becoming president in 2005, the 64-year-old has
patiently led a turnaround bankrolled by other Mitsubishi group
companies. Over that period, Mitsubishi Motors has struggled
with failed tie-ups with Daimler AG and Chrysler,
quality and safety problems and the costs of being a niche
player in a global vehicles market.
On Friday, the company said it would ask shareholders at its
June 25 annual meeting to approve a capital reorganisation - a
change in accounting that would clear the build-up of 924.6
billion yen of losses by reducing capital stock by the same
amount. Japan's 7th-largest carmaker by sales volume will also
seek approval for a 10-for-1 reverse stock split.
"We faced a difficult situation in the past few years with
the strong yen, Europe's economic crisis and the (2011)
earthquake, but my sense is that the company gradually became
stronger," Masuko told reporters on Friday, adding "We still
have to post profits in a stable manner, and shareholders need
to feel the company is growing."
Masuko said the focus is on hitting targets for the current
year, boosting car sales by almost a fifth to 1.17 million and
increasing operating profit by 48 percent to 100 billion yen
More than a third of the company's shares are held by
Mitsubishi group companies - MUFJ, Japan's largest
bank, Mitsubishi Corp and Mitsubishi Heavy Industries
were the three architects of the automaker's rescue,
taking the bulk of a preferred share offering in 2004.
To resume dividends, the company needs to figure out how to
deal with those preferred shares. Unless these are converted
into ordinary stock, Mitsubishi Motors will simply end up paying
dividends to its sister companies ahead of other shareholders.
But any conversion would dilute the value of ordinary shares.
"The company is finally becoming an ordinary company," said
Masashi Oda, Chief Investment Officer at Sumitomo Mitsui Trust
Bank's equity investment department. "Yen moves are backing
Japanese automakers and this is the time when it should deal
with this issue."
EMERGING MARKET FOCUS
Masuko arrived from the autos division of Mitsubishi Corp,
Japan's biggest trading house, where he spent time in Indonesia
and South Korea carving out Asian markets for Mitsubishi cars.
The automaker is now focused on emerging markets such as
Thailand, Indonesia, Russia, China and India, and has closed its
struggling operation in Europe, selling its Dutch NedCar plant
to bus maker VDL Groep last year for 1 euro.
In the year to end-March, Mitsubishi Motors posted record
net profit of $382 million. Its shares have soared more than 140
percent since mid-November, also helped by a weakening yen
, valuing the company at around $9.5 billion.
But its recovery is far from assured, and some sceptical
industry experts say Mitsubishi Motors' annual sales of below 1
million vehicles suggest it's not viable on its own. It sold
987,000 vehicles in the year to March.
The company was recently involved in another recall and was
warned by the transport ministry last month that it should move
faster to deal with problems requiring vehicle recalls. Masuko
has set up a committee to improve quality control and has called
on employees to change their work attitude.
"I have this sense of crisis that employees have become too
used to their jobs and were not able to make themselves aware of
the responsibilities related to their roles," he said last
Yoshiaki Kawano, an autos analyst at IHS Automotive, said
Mitsubishi Motors should be strengthening its brand value with
newer products. "But because of what happened to it in the past,
it's not been able to fully devote the money it's made into
product development," he said. "It's still in a transitional
stage, but the situation is gradually improving."
To expand its line-up, while cutting costs, Masuko has
pursued technology and product alliances with other carmakers,
such as the recent development of a 660cc minicar with Nissan
Motor that goes on sale in Japan next month, and the
joint development of a powertrain used in a PSA Peugeot Citroen
commercial electric vehicle.
The company now makes about 57 percent of its vehicles
outside Japan, up from 46 percent three years ago. Its operating
margin has improved to 3.7 percent in its latest financial year,
from just 1 percent three years ago - better than domestic rival
Mazda Motor Corp's 2.4 percent margin.
There are no signs that Masuko considers his turnaround task
completed, and analysts see his rebuilding efforts setting the
foundation for a successor.
"Hopefully he can build a culture in which employees can
pursue their interests without being too limited by its
resources," said Kawano at IHS. "That would not only improve the
company's products, but also enable a handover at an optimal
Mitsubishi Motors shares closed up 2.5 percent on Friday at