Mitsubishi Motors looks at Japan dealership reform

Edwina Gibbs writing for Reuteurs reports that Mitsubishi Motors Corp, Japan's fourth-largest automaker, said on Monday it is looking at restructuring its domestic dealership network as a key step towards turning around its loss-making home division.

"It may be that we have too many dealerships," Eiji Iwakuni, the automaker's new head of domestic car sales and marketing, told a news conference.

Iwakuni, formerly head of Ford Motor Co's Japan unit and before that a sales project leader at Honda Motor Co, is charged with fixing a division whose reputation has been battered by a major recall scandal while sales have plummeted on a lack of new models.

He was headhunted by the automaker after Rolf Eckrodt, chief operating officer of the passenger car division and himself recruited from Mitsubishi's partner DaimlerChrysler AG, was named chief executive.

Mitsubishi has around 1,100 domestic dealerships divided into two channels -- its main Galant channel and the Carplaza channel aimed at younger buyers.

"We have too many dealers for one dealership channel and the question remains as to whether Mitsubishi has the product development capability to maintain two channels," Iwakuni said.

He said he wanted to make a decision on restructuring by the end of the year.

Offering a frank assessment of Mitsubishi's dismal showing in the domestic market, Iwakuni also said the automaker could probably sell only 380,000 or at best 400,000 cars in the year to next March -- below its official target of 410,000.

Of that, 220,000 would likely be sales of the cheaper and lower margin 660cc minivehicles.

"That means we are selling less than 200,000 ordinary cars. Are we smaller than Mazda? -- yes we are," he said.

THE COLT HAS TO SCORE

Although Mitsubishi's U.S. division has shown robust sales, its domestic sales of ordinary passenger cars are down 30 percent at 105,018 vehicles since January.

Mazda, Japan's fifth largest automaker, has also seen its sales slide -- down 18 percent, but still higher than Mitsubishi at 129,128 units.

Concentrating on restructuring, Mitsubishi has not launched a new car since its eK Wagon minivehicle in October and has not had an ordinary passenger car launch since the June release of the Airtrek sports utility -- which proved to be a flop.

A major customer complaints scandal two years ago that resulted in the recall of nearly two million vehicles worldwide, has also taken its toll.

And the automaker suffered another embarrassment this month, recalling some 676,000 minivehicles in Japan to deal with a potentially defective battery box.

Iwakuni said he believed the carmaker's quality problems were being solved with the adoption of DaimlerChrysler's quality control system but acknowledged the automaker's new subcompact, the Colt, to be launched in November had to be success.

Mitsubishi will be the last of Japan's top five automakers to release a car in the fiercely competitive subcompact segment -- one of the few areas where sales are growing but one where automakers are under pressure to cut costs and margins are low.

Toyota Motor Corp and Honda have had runaway hits with their Vitz/Yaris and Fit/Jazz models respectively while Nissan Motor Co is reporting robust sales of its March/Micra. Mazda Motor Corp launches its Demio this week.

Iwakuni said he wanted to see the Colt manage domestic sales of at least 10,000 units a month and preferably 13,000.

"This is our chance to score and we have to make this goal," he said.

He added the company should aim for domestic sales of between 420,000 and 430,000 vehicles in the next business year and should be looking for 450,000-500,000 units in three years time.