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Mitsubishi fortunes looking up under new leadership
By Amy Chozick
The Wall Street Journal
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TOKYO -- When Hiroshi Harunari took over as chief executive of Mitsubishi Motors Corp.’s struggling North American operation in January 2006, morale among dealers and employees was at an all-time low.

The car maker as a whole had lost more than $2 billion a year earlier and had been losing money in the United States for three consecutive years. The unit had gone through three chiefs in four years, and its partner, DaimlerChrysler AG, had sold its stake in Mitsubishi in 2005. Many predicted it was only a matter of time before Mitsubishi pulled out of the competitive North American market.

Harunari embarked on a cross-country pilgrimage to win back dealers’ trust. In the first two months on the job, the Japanese executive visited 139 Mitsubishi dealerships in 29 states. He didn’t propose any sweeping changes but focused on listening to dealers’ long lists of grievances, and he assured dealers that Mitsubishi was committed to the U.S. market. He then took steps to address such basic problems as slow delivery of parts from suppliers.

“I knew the situation was bad,” says Harunari, 59, formerly the head of overseas operations based in Tokyo.

He had an additional challenge because the dealers he had to woo aren’t employees but independent small-business owners who need to make a profit to stay in business.

“I had to show I was ready to pick up the chestnut,” he says, citing an old Japanese proverb that says you should try to pick up a chestnut out of a burning flame — in other words, embrace a big challenge.

So far, Harunari’s personal touch seems to be working. In a surprise turnaround, Japan’s No. 4 car maker by sales volume swung back to a full-year operating profit of $5 million in North America in the fiscal year ended March 31. Sales in the United States during that period, led by the new Lancer sedan and Outlander sport-utility vehicle, reached 124,000 vehicles, an 8 percent increase from the previous year, reversing a four-year drop. Sales per dealer increased by as much as 21 percent compared with a year earlier, indicating that dealers were encouraged to order more cars from Mitsubishi.

Don Herring Sr., owner of three Mitsubishi dealerships in Dallas, had doubts about Mitsubishi’s future before Harunari dropped by — on at least three occasions — and “just asked us what we thought,” he says. Herring says the personal visits indicated the company was sincere about trying to make a comeback.

Work in the trenches

While case studies abound of charismatic CEOs announcing ambitious goals to jump-start a company, Harunari has invigorated Mitsubishi in the United States by focusing on old-fashioned bonding with people in the trenches. This “inverted pyramid” style of management is a growing trend in corporations, says Paul Rogers, the London-based head of the global-organization practice for U.S. consulting firm Bain & Co. Top executives are realizing that getting to know people on the front line can build employee loyalty, and “loyal customers are driven by loyal employees,” Rogers says.

Mitsubishi’s turnaround poses a threat to Asian rivals, such as Japan’s Nissan Motor Co., which saw its sales drop last year in the key U.S. market. It also adds more competition to Detroit’s Big Three, which have been reporting heavy losses.

Mitsubishi’s challenge isn’t over yet. Even with stronger sales, the company holds less than 1 percent of U.S. market share. And at a time when the overall demand for cars in the United States is showing signs of slowing, competition is heating up, both from higher-end models by Toyota Motor Corp. and Honda Motor Co. of Japan, and from lower-priced cars by Hyundai Motor Co. of South Korea.

What’s more, Mitsubishi’s results were helped in the latest fiscal year by the weak yen, which increases the value of overseas earnings when converted into the Japanese currency. The company forecasts that the yen will be much stronger this year, causing a slight drop in operating profit in North America in the year ending March 31, 2008, despite a rise in sales volume. Analysts have said, however, that the yen has been much weaker so far than the company’s estimates.

Unlike many top executives at Japanese car companies, Harunari, who likes to read German science-fiction novels in his spare time, didn’t spend his whole career at Mitsubishi Motors. He worked for more than 25 years at trading house Mitsubishi Corp., another company that is part of the umbrella Mitsubishi Group. The trading house was among several companies in the group that rushed to a $3 billion bailout of the car company after DaimlerChrysler sold its remaining shares.

Plan for revival

Mitsubishi Motors equipped Harunari with a sweeping revitalization plan. After racking up bad consumer loans by targeting young drivers with poor credit records, the company switched to older, more financially secure drivers with new models such as the Lancer. Mitsubishi also tied up with Merrill Lynch & Co. in the U.S. to fund its loans to car buyers, rather than financing its own loans.

But Harunari thought his biggest task was to win back the disgruntled dealers who felt alienated by the string of management changes and persistent rumors that Mitsubishi was pulling out of the U.S. While he had never lived in the U.S., he made a point of driving himself to many of the dealerships. On a recent trip to Texas, he flew to Dallas, then drove a borrowed Outlander to visit dealers in San Antonio, Austin and Waco.

“Visiting a dealer’s place of business is like visiting their home,” Harunari says. It shows “we appreciate them.”

To underscore Mitsubishi’s intention to remain in the U.S., the company launched in April last year a 25th anniversary advertising campaign.

“It’s been 25 years since we made our first mark in America. The next 25 years begins today!” said the ads, which ran in print and on television. To show dealers his responsiveness, Harunari launched a “Dealer Co-Op” program that gives individual dealers financial assistance with local marketing efforts, such as sponsoring charity events or running ads in a community newspaper.

Mike Graeber, owner of a Mitsubishi dealership in San Bernardino, California, says the co-op program was something nationwide dealers had been pushing for but that no one else had responded to. “We finally feel like our voices and concerns are going to senior management,” Graeber says.

Back in his office in Cypress, Calif., southeast of Los Angeles, Harunari gets to work at 7 a.m. to respond to 200 e-mails from employees and dealers before 9 a.m., often about new problems cropping up. “Frustration can build up like a volcano,” he says. “My job is to settle it before it explodes.”

Harunari says that, for now, he is keeping his goals modest. He would like the company to capture 1 percent to 2 percent of U.S. market share this year, up from about 0.8 percent in 2006.

“If I said we’re going to sell like Toyota, everyone would laugh,” Harunari says. “We’re just aiming for satisfied customers.”



Mitsubishi sales

Chart below shows Mitsubishi Motors North America sales.

2000...315,000

2001...322,393

2002...345,000

2003...256,810

2004...161,609

2005...123,995

2006...118,558

2007...70,357*

* Through June 2007

Take a look
Rich Gilligan, left, former co-president of Mitsubishi Motors North America, and Hiroshi Harunari, CEO of MMNA, are shown behind the wheel of an Eclipse convertible at the 2006 North American International Auto Show in Detroit. Since taking over in January 2006, Harunari has begun a cross-country venture to win back dealers’ trust. The effort seems to be paying off — the company made a profit of $5 million in North America in the fiscal year ended March 31 after the car maker lost $2 billion as a whole in 2005. (Pantagraph file photo/SCOTT MILLER)
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Reader comments on this story - 13 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

Realistic wrote on Jul 25, 2007 4:58 PM:

" The probability that MMNA will continue to exist past the future contract talks has been improved by the fact that the company is selling more cars each month and that the company is beginning to show a profiit. Also, the pride of the Mitsubishi company in Japan and its deep pocket corporate partners would cause one to believe that closing or selling its only manufacturing plant in NA would be embarrassing, and only occur as a absolute last resort. The more important issues are the current talks between the UAW, GM, and Ford. The deals made with those two companies and the probable concessions agreed upon will shape the 08 contract for Mitsubishi employees. "

MMNA Turn Around wrote on Jul 23, 2007 9:34 AM:

" I worked at MMNA years ago when morale was low, product was poor and management was terrible. Sometimes companies grow to fast, succes goes to workers heads taking their high pay for granted. MMNA has been working hard and the employees now appreciate their pay, I hope. Maybe MMNA needs to check out some other fast growing companies and take some of their market as these companies are beginning to have issues as the success is going to their heads, quality is not what it used to be and consumers are becoming unhappy, Toyota. MMNA is important to Normal. I hope they will turn around! "

to wonder why wrote on Jul 23, 2007 8:53 AM:

" You should drive by this plant and count the # of people driving Mitsubishis and figure the ratio to number of employees. Then, go to another automotive plant and count the number of their vehicles in the lot and compare that ratio. There are a lot of Mitsubishi employees that drive their cars. I recently visited a plant that made a very popular Toyota and there were hardly ANY in their parking lot??? I wonder why? "

To Wonder Why? wrote on Jul 23, 2007 5:53 AM:

" Do you think that all State Farm employees have State Farm Insurance? "

FYI wrote on Jul 22, 2007 9:33 PM:

" I once drove by the Rolls Royce plant in England and didn't see any Rolls in their parking lot. "

HEY WONDER WHY wrote on Jul 22, 2007 6:43 PM:

" Have you ever thought that maybe the drive other cars to work because they love their Mitsubishi. I know plenty of people who work there and they own what they build. What about you? Do you support your local workers and drive what they build for you? "

MMNa worker wrote on Jul 22, 2007 3:22 PM:

" Hey life support... where do you get your info? Seems like the contract is up Aug of 08 not next Feb. or March. I, for one, firmly believe we will be here next year and the year after and the year after.... for a long time. Sales are up.. not like 10 years ago but they are up.. yes even for our cars we build here. The company is talking to other car people.. most recently... Puegoet is interested in having MMNA build some cars for them. Mitsubishi knows they have to stay in the US market and that means staying in Normal. As for the parking lot being empty of Mitsu cars.... get a life. If you have nothing to do other driving by our parking lots.. you ....need to get a life. Ask anyone who has a Mitsubishi car here and they will tell you that they love it and it is well built. Yes.. I have two of them and love them both. "

Gosh wrote on Jul 22, 2007 2:27 PM:

" do you also wonder why anyone the say works at McDonald's or Wal Mart would dare to eat or shop anywhere else? I say this is part of being an American we can make choices of what to buy and where to shop. I actually work out at the plant and I also own one of our cars but would never judge anyone that does not drive them it is there choice. The autos we make are a good product. "

I Drive One wrote on Jul 22, 2007 1:56 PM:

" I am a long time customer of Mitsubishi cars. I have loved everyone I have purchased. My personal opinion is this Mitsubishi has received a bad rap by what has happened in another country that has nothing to do with the cars that are made here. I know several people who work at the plant or who have worked at the plant. They are hard working people who put their heart and soul into the product they make. It shows by the cars I have driven. To who made the statement they do not own Mits cars that is a lie. I know a lot of people leave the great Mits home for the family and drive the other cars to the plant. Please don't bash a company that has helped this town and surrounding businesses. People unfortunately believe the trash talk about this company. Times are hard everywhere this is not the companies fault!!! We as people are the only ones who can change what is happening. Being fearful and not buying hurts our economy not Mitsubishi they have made it flourish!! Thank you to all who made my 07 Mitsubishi Eclipse I love it!!!! "

There is hope wrote on Jul 22, 2007 11:17 AM:

" To life support - you're partly right. The "previous" contract was due to expire aroung march. Mitsubishi regretted ever signing it with hourly raises benefits kept the same or increased. Bancrupt after losing $billions and the Crysler pullout. A year ago that contact was extended more, this time with major concessions. This happened withion two months of major turn-over of union leadership, to a passive company friendly group. Mitsubishi pounced like a cat on the lack of experience-driving one of them to tears following the talks. So it's to early to hear about new contract talks. Rest assured that plant won't stop producing for Mitsubishi. It can be a huge money maker. When the new japanese cars lose their novelty and sales slow in a year or two talk will return to putting more work in that plant. best guess is another car company will have them build something for them. That's two years away though. The company will seek more when this contract ends. If the same weak union leader is in place they will give more to get a new product. They lack the experience to understand how that business works. The work is coming anyway. "

Wonder Why? wrote on Jul 22, 2007 9:12 AM:

" When you drive past the Normal plant and see that the employees don’t even drive the cars they make, you wonder why.???? "

oh boy!! wrote on Jul 22, 2007 6:22 AM:

" I can't wait for all the bashing to start on this one. The regular negative commenters will have a field day bashing all of our local workers on this article. Always happens, turn a positive article into nothing but negative. GOOD LUCK MITSUBISHI WORKERS!!!!!! "

MMNA on life support wrote on Jul 21, 2007 11:41 PM:

" I don't think that there are many associated with Mitsubishi in Normal who believe that it will be around this time next year. Their contract woth the UAW is up in Feb or March. We have heard nothing about any contract talks now or in the future. Those who will lose their jobs will not face the shock that we did at least. I would have never thought that we would have to start life all over again at the bottom, my husband only bringing home only a third of what he did during his time at MMNA. The job market around here is bad already and it isn't going to get any better. I used to hope that someone else would build cars there after MMNA moved out. That is totally unrealistic. Maybe it will become that prison that so many predicted. It is very sad. "
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