The Big Shrink: Mitsubishi Thinks Small After Profit Plunge

Mitsubishi Motors’ membership in the great Renault-Nissan alliance won’t protect it from economic realities arising from the coronavirus pandemic. On Tuesday, the automaker announced an 89-percent drop in operating profit for the year ended March, with black ink totaling just $119 million.

Rocked by the virus that’s thrown every automaker’s balance sheet into disarray, Mitsubishi scrapped its planned dividend and held back from issuing a projection for the current year. It’s also thinking small. The virus has changed the global landscape, and Mitsubishi says it will have to change to meet the challenge.

After reporting the company’s poorest results in three years, CEO Takao Kato addressed journalists by teleconference.

“Before the virus we had been mulling which underperforming regions and vehicle segments to cut our exposure to,” he said, as reported by Reuters. “In the wake of the virus, we need to pick up the pace of making these changes. To stay competitive in a post-coronavirus market, we need to immediately shrink our area of focus to regions and segments in which we excel.”

Mitsubishi was already struggling in Asia, China especially. The arrival of the cost-incurring, market-sinking coronavirus occurred at a bad time.

In response to the new reality, Mitsubishi says it will chop its fixed costs by 20 percent or more in the next two years while attempting to bolster its standing in Southeast Asia, from which it draws one-quarter of its sales. Its alliance duties remain, however. The group is expected to announce a going-forward plan in late May, providing details on which members will do what, and where.

What Mitsubishi’s plan means for North America remains to be seen. The automaker said it will offer more details on its near-term strategy at the end of the first fiscal quarter.

[Image: Mitsubishi Motors]