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http://news.yahoo.com/news?tmpl=story&u=/nm/20040423/bs_nm/autos_daimlerchrysler_mitsubishi_dc

By Alexander Huebner and Chang-Ran Kim

STUTTGART/TOKYO (Reuters) - DaimlerChrysler AG will no longer bankroll Mitsubishi Motors and may sell its stake, leaving the German auto giant's global strategy in disarray and the future of the ailing Japanese firm in doubt


Chief Financial Officer Manfred Gentz said on Friday that the Stuttgart-based company failed to agree with other Mitsubishi group shareholders on a bailout plan for Mitsubishi Motors Corp and would not provide any new funds.


DaimlerChrysler shares shot higher as investors expressed relief at what appeared to be the end of its costly entanglement with Japan's only unprofitable carmaker. They were up 6.7 percent at 38.5 euros.


Several brokers upgraded the stock.


"It's a great news that they've stopped pumping money into Mitsubishi, they are fighting on so many fronts already and it was never an important focus," said Gerald Roessel, a fund manager at Invesco Asset Management in Frankfurt. "It was high time that they stepped on the emergency brakes."


Gentz said DaimlerChrysler would not decide on the fate of its 37 percent stake until the details of a restructuring plan led by three other Mitsubishi group firms -- who own 23 percent of Mitsubishi Motors -- were clear, but a sale was possible.


"We may reclassify our participation from at equity to available for sale," he said in a conference call held to explain the strategy U-turn agreed by management and supervisory boards late on Thursday.


Anticipation of a bailout had lifted Mitsubishi Motors' shares by 34 percent this month. The shares were suspended for much of the day, and met a wave of selling when the suspension was lifted, closing 25 percent down at 241 yen ($2.21).


DaimlerChrysler bought the Mitsubishi stake for 405 yen per share in 2000, with a view to expanding in Asia. The deal was engineered by Chief Executive Juergen Schrempp, who dreamt of building a global automaker.


Schrempp, who has presided over the loss of some 37 billion euros ($43.97 billion) in market capitalization since Daimler merged with Chrysler in 1998 and faced calls to resign at a shareholder meeting two weeks ago, was not available to comment.


ASIA STRATEGY UNDER REVIEW


His finance chief said he saw no reason for an immediate writedown of the Mitsubishi stake, whose market value is roughly equivalent to book value at the end of 2003, but could not specify the decision's impact on 2004 results.


Group strategy in Asia would be reviewed, he added, but cooperation between Mitsubishi and the group's U.S. Chrysler unit on new vehicle development and production would continue.


"As far as our Asian strategy is concerned -- in which MMC was a major cornerstone -- we'll reconsider what has to be changed and what can or cannot be adjusted," he said.


"Chrysler can continue with its product plans and also with its production facilities as before. There is no reason why we should change that."


DaimlerChrysler sources played down suggestions of a boardroom rebellion against Schrempp, saying he had initiated the move to walk away from Mitsubishi Motors after failing to win enough support from fellow shareholders for a capital hike.


The news took the three main Mitsubishi group firms -- Mitsubishi Corp, Mitsubishi Heavy Industries and Mitsubishi Tokyo Financial Group -- by surprise but they vowed to continue their support for Mitsubishi Motors, the main flagbearer of the group's 120-year-old three-diamond logo.





NEW BUSINESS PLAN

Mitsubishi Motors and the three group companies said they would create a restructuring team under the automaker's newly appointed chairman, Yoichiro Okazaki, to craft a new medium-term business plan over the next month.

"They may be able to scrape together enough aid money to see Mitsubishi Motors through the next year or two, but the auto maker will need more capital from outside," said Tatsuo Yoshida, a Tokyo-based auto analyst at Deutsche Securities.

"It would be very difficult for Mitsubishi Motors to survive on its own."

Japanese government officials also expressed concern.

Ratings agency Standard and Poor's added to Mitsubishi Motors' woes, slashing its long-term credit rating by three notches to CCC-, or three notches above default status. Moody's put the firm's senior debt on review for possible downgrade.

The automaker had been expected to seek shareholder approval on April 30 for a 700 billion yen ($6.4 billion) bailout.

Sources and media reports had said DaimlerChrysler would fund more than half of that, with plans to consolidate the Japanese company in its books within a few years. Mitsubishi group firms were expected to provide more than 100 billion yen.

Reeling from losses on a sales campaign in which it offered easy credit to U.S. car buyers, the maker of the Pajero sport utility expects a net loss of 72 billion yen for the 12 months to March 31. It had profit of 37.36 billion the previous year.

Its net automotive debt stood at 726 billion yen six months ago, while total interest-bearing debt was 1.141 trillion yen.

Shares in Mitsubishi Heavy, Japan's largest heavy machinery manufacturer, trading house Mitsubishi Corp and Mitsubishi Tokyo Financial Group, which own a combined 23 percent of the auto maker, all sank.
 

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yeah mitsubishi hasnt made a damn decent car in forever . . (if ever?) . . please get rid of em . . . and those ugly ass mini-suv's theyre making
 

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They will probably disappear from the North American market -- they just can't compete with Honda, Toyota, Nissan, and Hyundai.
Save for the Evo, their product line is just uninspiring, lackluster in quality, dated in technology and engineering, and not very competitively priced.
 

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I know a kid that's been sooping up his Galant VR4's for a long time. Apparantly he bore out an extra liter and smoked everyone at the drag strip who was thinking the same thing they think of our passats:

"Ehh, it's just a family car, what can it do?"

Ricers: 0
Everyone else: 1
 

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aowhaus said:
They will probably disappear from the North American market -- they just can't compete with Honda, Toyota, Nissan, and Hyundai.
Save for the Evo, their product line is just uninspiring, lackluster in quality, dated in technology and engineering, and not very competitively priced.
Very true...I dont think it will happen though.

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Mr. Mercedes lost name recognition a while ago. It was Diamler-Benz which purchased Chrysler (although they like to pretend it was a merger, Benz was at the helm)
 

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Daimler was a German luxury car mfr about a 100 years ago. Rolls/Bently type stuff. Mr Daimler and his partner Mr Maybach might have invented the automobile depending on who you ask (either them or Karl Benz). You need to watch more of those auto history shows on Speed!
 

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I just sold my 1991 Mitsu VR4 and I must say that I miss it, I am looking at coming over to the VW side so I can have another turbo car, would like 4 motion but if not thats ok. Must say I loved it and I hope that I will like my Passat. I also have a 97 eclipse that is a total different thing, not as well put together as my 91 VR4.
 
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