Mitsubishi gets its mid-term report card

Mitsubishi announced its mid-year earnings.  Not surprisingly, they are mediocre. The company actually saw net sales increase to 1,005.4 billion yen from 991.3 billion over the six month timeframe.  Interestingly, though, sales volume was actually lower…so credit favorable exchange rates for revenue increases.   Overall for the period, Mitsubishi had an operating loss of 5.5 billion yen, which sounds bad until one realizes that’s 14.1 billion yen better than this time last year.   

Looks like Mitsubishi is going for the Ford “cut costs” approach to car building.Speaking of Ford, one might say that Ford and GM’s complete lack of direction (and good products) have benefited Mitsubishi.  In North America, Mitsu sold an additional 3,000 units so far this year for a total of 84,000 – roughly the number of Ford Mustangs delivered in six months.  The company’s strongest gains came in the Russian region, where significantly increased demand resulted in 142,000 vehicles.   Evidently, Russians are more at ease with spending money for cars with sketchy reliability!

The most interesting part of the company’s press release was the section dedicated to operational initiatives.   For the American region these include:           

Increase buyer appeal and sales through introduction of the new Outlander and Lancer models
Reinforce sales capabilities via dealer training
Effective advertising focusing on Mitsubishi’s 25 years in the
U.S. market
Enhance sales through effective use of financial service operations
Improve productivity at the
Illinois plant

Many of these we simply cannot argue with.  Improving productivity is huge, as is releasing new products – especially the Outlander, which finally puts the ugly last generation model out to pasture.  Dealer training should be applauded, because it’s often ignored by manufacturers as a point of improvement.  One might say that this should be a number one focus, because the Mitsubishi dealer network is one step above Goodwill for quality of staff. The company, however, appears to be focusing just on sales when dealer service has long been one of the brand’s many Achilles heels.

Mitsubishi should be focusing on increasing quality throughout the company. It all starts with engineering-out the high failure rates of components within the vehicles.  This takes money, time, money, corporate commitment, plus money.  Products can look good, go like stink and be considered prestigious, but if the ownership experience is miserable from start to finish, then the company is doomed to generations of red ink…just ask Jaguar.

And if we read the “effective use of financial service operations” objective correctly, it appears that Mitsubishi will choose deep incentives over building the value of the brand.  Deep discounts might move product, but it isn’t great for long-term profitability.  Heck, it stinks for short-term profitability, as well.At some point Mitsubishi will realize what Mazda finally did: if you put as much effort into your mass-market cars (sedans, coupes, hatches, and crossovers) as you do your niche vehicles (Miata/Evo sports cars,) you can actually sell vehicles without deep discounts.  The profit made with improving sales can then go back into R&D, increasing the quality of product.Plus, as product strength increases across the brand, better employees are attracted to dealerships.  This provides an opportunity to train better-qualified sales and service personnel, which leads to better overall perception of quality.

Of course, they could simply continue to build a fun (yet cheaply built) Evo, an Eclipse that continues to miss its core target, and Galants and Outlanders that looked like the engineers “phoned-it-in” until the company’s value is so low Audi or BMW buys them out.  The company has so much potential — we know we’re not the only ones who see it.

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3 Responses to Mitsubishi gets its mid-term report card

  1. Bill F. says:

    Dammit, man, that apostrophe in the title is outrageously misplaced. Please restore my state of syntactical wholeness.

  2. Mike Barer says:

    So do you think Ford stock would be a good buy right now?

  3. In a word: no.

    I believe Ford’s commitment to change is too much like an addict claiming they’re done with drugs. Ford, like Chevy, has yet to hit rock bottom.

    Take notice that there hasn’t been any significant housecleaning of directors or vice presidents (of which there are thousands.) All the changes have been typical for a modern major corporation, which is to say the mid-level and below get cut, while the people who have made the bad decisions simply get shuffled in another reorganization.

    Ford’s stock price won’t be a good buy until they are closer to offering products that can compete with Toyota and Honda at the Ford/Mercury level and BMW and Audi with its Jaguar and Lincoln brands.

    All I see is Toyota cutting significantly into Ford’s sales with a new Tundra coming in January, plus Mustang sales dropping off as the pool of customers interested in a retro-designed old-school live-axle coupe dry up.

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