Mitsubishi Motors in US calls it a day

September 21
4:24 AM 2015

Japanese automobile major Mitsubishi Motors Corp has begun the process of closing down operations in the US. Mitsubishi had put on its sole US manufacturing unit on the block, but couldn't find a suitable buyer and decided to close the shop.

The media reports say that the automobile company is likely to inform its employees about its decision on closure. The soaring labor costs and strengthening of the dollar had impacted the performance of Mitsubishi.

Adding to this, low volume churn out has also majorly affected its operational viability. 

Mitsubishi Motors didn't say anything confirming latest media reports, but it had already announced in July that stopping the production at the manufacturing plant.

The Illinois-based Mitsubishi's manufacturing plant is the only Japanese-owned US auto factory that's represented by United Auto Workers (UAW). The factory has 900 employees, who work on hourly basis. 

The stronger dollar makes imports of cars much attractive for Americans while increased production costs and low volumes are adversely impacting Mitsubishi Motors.

The closure comes at a time when UAW is holding talks with automobile major Fiat Chrysler on demands of workers. The main demand is hike in wages. UAW is negotiating with Detroit-based three major automobile giants on workers' wage demand. 

Mitsubishi Motors is shifting gears to enhance its overall presence in the global market. After deciding to shut the US operations following the steep drop in volumes, Mitsubishi has turned keen on other markets including Southeast Asia and Russia, while strengthening its market share in Japan. 

Mitsubishi's President Tetsuro Aikawa recently said that Japan Asean nations, Russia would be focus markets for the company. Mitsubishi Motors is in the process of evolving business strategies to establish its presence in Asean nations.

Mitsubishi Motors North America (MMNA) is the sixth largest company in the Bloomington region. The closure is expected to be complete by the end of this year. The US factory of Mitsubishi manufactures Outlander sports utility vehicle. The local state offered concessions and tax incentives to Mitsubishi Motors at the time of setting up the unit.

The total concessions and tax benefits were estimated to be $250million for Mitsubishi Motors. Initially, the total headcount was 4,000 and the factory was making 200,000 vehicles. The production level dropped to 64,000 in 2015.   

Industry observers feel that the closure of Mitsubishi will impact the ongoing discussions with automobile manufacturing companies and is likely to be a big blow for UAW. Mitsubishi in a joint venture (JV) with Chrysler established its unit in 1988 and subsequently took total holding in the JV in 1991. Now, it's a sole unit of Mitsubishi Motors in the US.

Daimler Chrysler bought a stake of 34 percent in the Mitsubishi Motors North America and sold it to Goldman Sachs for a loss four years later. However, within a week, Goldman Sachs made a profit of $80mn by reselling the shares.

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