Mitsubishi Motor Corporation: Leaving its deep crisis for an electric future?

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Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Berlin (2010)

Abstract:

Mitsubishi Motor Corporation: Leaving its deep crisis for an electric future?
 
Shinya ORIHASHI
 Associate Professor of Economics, Tohoku Gakuin University
Specially appointed researcher, MMRC, the University of Tokyo
 
Daniel Arturo HELLER
Associate Professor of Business Administration, Yokohama National University
 
Hidetada HIGASHI
Assistant Professor of Business, Yamanashi Gakuin University
 
Mitsubishi Motors Corporation (MMC)’s predecessor was the motor vehicle division of Mitsubishi Heavy Industry (MHI), the beginnings of which can be dated back to the 1910s. So, MMC can be considered one of the oldest automobile manufacturers in Japan. In 1970, the motor vehicle division spun off from MHI and MMC was officially established. At the same time, MHI signed a joint venture agreement and received 15% equity participation from Chrysler Corporation, which lasted until 1985.
After the 1970s, the overseas operations of MMC were limited to East Asia, largely because of the business cooperation with Chrysler. As a result of this initially forced concentration of its resources, MMC has been able to develop a strong presence comparable to Toyota in this key region of the world; however MMC’s equity stake in its overseas affiliates, including those in Asia, tends to be relatively low compared to that of Toyota.
Traditionally, MMC was the only full-line manufacturer in Japan. Even the leading Japanese manufacturer, Toyota, leaves left the micro car “kei” segment to Daihatsu and the large commercial vehicle segment to Hino, as well as the assembly operations of many of its the mid-range models to its body-assembler subsidiaries. In this way, Toyota covered the full-line with the collective strength of the Toyota Group. In contraast, one could say that in trying to cover the entire auto market by itself MMC “bit off more than it could chew”, considering its firm size and managerial resources. This over-extention of resources seems to be the major cause of many of the managerial problems MMC has suffered over the years.
For MMC, it was a series of difficulties, from late 1990s until the mid-2000s. In the middle of the 1990s, MMC delivered strong results, largely because of favorable sales of its recreational vehicles (i.e., SUVs). However, several subsequent corporate misdoings, such as a sexual harassment case in the U.S., an financial scandal in Japan and so on, caused the public to lose confidence in MMC and sharp decline of the automakers sales worldwide from the latter half of the 1990s. As one misfortune followed another, its domestic sales in the mid to 2000s reached the nadir of recent years as a result of a major scandal involving a recall cover-up. 
In order to overcome the difficulties it faced since the mid-1990s, MMC tried to turn itself around by reorganizing its domestic plants and entering into business tie-ups with foreign manufacturers. In 1999, MMC and Volvo entered an equity and operational alliance covering their truck and bus operations; Volvo acquired 5% of MMC stock. However, MMC thereafter decided to enter into a business tie-up with DaimlerChrysler in 2000. MMC’s large commercial vehicle division also joined this alliance in 2001, breaking its agreement with Volvo. In 2001, DaimlerChrysler replaced Volvo as MMC's strategic alliance partner in the truck and bus sector. In 2003, the large commercial car division was spun off from MMC and became Mitsubishi Fuso Truck and Bus Corporation. DaimlerChrysler holds a majority of Mitsubishi Fuso’s shares and since 2003 MMC has focused its business scope on the passenger car (including SUVs) and micro car segments.
In 2004, DaimlerChrysler decided not to provide MMC with any additional funds to support MMC’s ongoing restructuring, largely due to repeated recall cover-ups. From this decision, the alliance with DaimlerChrysler gradually dissolved, as MMC pursued its turnaround with assistance from Mitsubishi Group companies.
Meanwhile, MMC’s organizational capability in manufacturing operation has remained relatively strong continuously. For example, skilled shop floor leaders, engineers and managers have enabled MMC’s Mizushima factory to manufacture more than 10 models, from micro cars to commercial vans, in the same plant facility. Strong organizational capability in manufacturing is a valuable resource and has contributed to MMC’s present recovery.
A lack of consumer confidence, largely due to repeated recall cover-ups, has prolonged MMC’s slump in domestic sales, but recently there are some signs of recovery due to introduction of new models. MMC has also started to supply OEM (original equipment manufacturing) vehicles for Nissan and PSA, thereby contributing to a gradual recovery of MMC’s operating ratio, including MMC retraction of a decision to close its Okazaki plant.
As MMC has now largely emerged from its deep crisis, the automaker is strongly pushing to become the global leader of electric vehicles. In July 2009, MMC introduced into the Japanese market its first electric vehicle (EV), named i-MiEV.[1] MMC has also reached agreement with PSA to develop additional versions of the vehicle for the European market to be sold under the Peugeot and Citroën brands.
MMC has a long history of researching EVs, which originally began with its research of lead-acid battery EVs in the late-1960s. MMC has researched and worked on development of lithium-ion battery-powered EVs since early 1990s. MMC committed to the market introduction of iMiEV in 2005. Thanks to the long history its research and development of EVs and its flexible manufacturing capability, MMC stands ready to realize the first successfully mass-produced EV.

[1] i-Miev stands for: Mitsubishi innovative Electric Vehicle, based on the "i" micro car that is sold in Japan

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