* Company seeks capital reorganisation
* To reduce capital stock, clear $9 bln of accumulated losses
* Also proposes 10-for-1 reverse stock split
* Shares close up 2.5 pct
By Yoko Kubota
TOKYO, May 24 (Reuters) - 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 15-year gap.
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 ($986 million).
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."
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 month.
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 time."
Mitsubishi Motors shares closed up 2.5 percent on Friday at 162 yen.