Daimler Sells Rest of Stake in Mitsubishi
DaimlerChrysler on Friday sold its remaining 12.4% stake in struggling Mitsubishi Motors Corp. to Goldman Sachs for an undisclosed amount, ending an unsuccessful attempt to profit from the Japanese auto industry.
The German-American automaker once owned 37% of Mitsubishi as part of a strategy to become a dominant international force in the industry.
Five years ago, DaimlerChrysler Chief Executive Juergen Schrempp paid at least $2.2 billion for an interest in Mitsubishi when automakers were positioning themselves for expansion in China and Southeast Asia.
But Mitsubishi, the only unprofitable Japanese automaker, has seen its sales tumble after being staggered by a scandal in Japan over a series of product-defect coverups there.
Investment bank Goldman Sachs said it would resell the Mitsubishi stake to institutional investors. The deal isn’t expected to affect U.S. operations or the 450 employees at Mitsubishi Motors North America Inc. headquarters in Cypress.
“DaimlerChrysler is winding up the last vestiges of Schrempp’s ambitions for a worldwide auto empire,” said auto analyst David Healy of Burnham Securities Inc. “Mitsubishi blew up on them a year ago, and this is just sort of the cleanup.”
Schrempp, 61, will be replaced at the end of the year by 52-year-old Dieter Zetsche, who led Chrysler’s comeback and now heads Mercedes.
In April 2004, Schrempp faced an internal management revolt that included Zetsche, who opposed putting more money into Mitsubishi. As a result, DaimlerChrysler refused to take part in a $6.4-billion bailout of Mitsubishi last year, allowing its holding in the automaker to shrink.
DaimlerChrysler is concentrating on growing its profit at its Chrysler and Mercedes groups. DaimlerChrysler didn’t reveal the value of the Mitsubishi sale but did say that it was expected to close by the end of the month and that it would add $588 million in revenue to the company’s balance sheet.
Mitsubishi has responded to its problems by changing management, cutting costs and stopping production of unprofitable models such as the Diamante luxury sedan. In January it also announced the layoff of 300 workers at its finance arm in Cypress.
“Mitsubishi is coming off some hard times,” said analyst George Peterson, president of Tustin-based AutoPacific Inc. “They should be in a pretty good position next year to really begin building off of a stronger base.”
Since DaimlerChrysler withdrew its financial backing, Mitsubishi has received bailouts from the Mitsubishi group of companies, including a bank, a heavy machinery maker and a trading company.
On Thursday, Mitsubishi said its loss narrowed 64% to 63.8 billion yen ($539.6 million) in the first half of its fiscal year through September from 178.8 billion yen in the same period a year earlier.
Mitsubishi’s North American unit has faced its own problems this year, with a change in the executive suite and declining sales.
In January, Finbarr O’Neill resigned as president of Mitsubishi Motors North America after a yearlong plunge in the company’s sales. He was replaced by Rich Gilligan, a longtime Ford Motor Co. veteran who had run Mitsubishi’s North American manufacturing division.
Mitsubishi’s sales in the U.S. have continued to slide, and it now has less than 1% of the passenger vehicle market, down from 2% in 2002. Through October, Mitsubishi has sold 105,420 vehicles this year, down 25% from a year earlier, according to WardsAuto.com, an industry website.
The company makes such vehicles as the Eclipse Spyder convertible, the Montero sport utility vehicle and the Raider pickup.
Although DaimlerChrysler’s capital ties have been severed with Mitsubishi, joint projects between the companies will continue, Mitsubishi said. They include the development and production of engines and the production of several vehicles.
“Mitsubishi is buying Dodge Dakotas and re-skinning and re-badging them as Raiders,” Peterson said.
Times wire services were used in compiling this report.
