MMNAin gear but not ready to floor it

MMNAin gear but not ready to floor it

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NORMAL - Mitsubishi's drive back to profitability does not include the return of nearly 1,200 jobs at the manufacturing plant in Normal - at least for now.

Sales first, production second, Mitsubishi Motors North America officials said last week at the North American International Auto Show in Detroit.

With the planned introduction of six redesigned vehicles in less than three years, including the 2007 Eclipse Spyder convertible unveiled in grand fashion last week, officials expect a sunnier sky in the future.

They've targeted March 2007 for Mitsubishi's return to profitability but don't expect the company to roll out new vehicles or more jobs in Normal any time soon.

"We wouldn't entertain the thought of a second shift until we have sustained production," Rich Gilligan, MMNA co-chief executive officer, said after unveiling the made-in-Normal Spyder last week. "The name of this game is increased volume. That's why we're looking at these new models."

He wouldn't say how many vehicles the Normal plant would need to produce to regain the second shift and the nearly 1,200 workers who were laid off in 2004 after sales nosedived.

"It's not cut-and-dry," said Gilligan, adding the first step is increasing production with the shift already at the plant.

And while Mitsubishi will unveil a new Lancer sedan, Lancer Evo and Outlander sport utility vehicle in the next two years, introductions of new Normal-made models are over for now. The redesigned 2006 Eclipse coupe and Eclipse Spyder are the only new vehicles rolling off the assembly line in Normal.

The Lancers and Outlander are made in Japan, and a recently launched midsize truck, the Raider, is made at a DaimlerChrysler plant in Michigan. Gilligan dispelled rumors any of those vehicles will be made in Normal.

The Outlander SUV, which will make its American debut this fall, has been so successful overseas that Japanese manufacturing plants have maxed out production capacity. Japan's inability to make more Outlanders started another round of speculation that the Outlander could become the fifth vehicle made in Normal, joining the Eclipse, Spyder, Galant and Endeavor.

Not so, said company leaders, who just can't make a business case for it now, said Gilligan, noting Mitsubishi also has a five-year contract with Chrysler to build the Raider.

But long-term, he noted, "the (Normal) plant is fully capable of making any Mitsubishi model."

Plant capacity and profitability

Production at the Normal facility has dropped to nearly 40 percent of full capacity. Workers made about 110,000 vehicles in 2005, spokesman Dan Irvin said. With two full shifts, the Normal plant could build around 240,000 vehicles a year, he said.

The most the plant ever produced was 222,036 vehicles in 2000, according to figures MMNA previously released.

To maintain profitability, the average American auto manufacturer needs all plants operating at 100 percent, said Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. Mitsubishi's 2007 goal for profitability would require an "impressive" turnaround, he said.

"You've got to be at 100 percent capacity utilization. Through restructuring, you'll hear from Ford (Motor Co.) and (General Motors), that will be their goal," he said, citing the companies' plans to close plants so remaining assembly lines will work at 100 percent capacity.

The Mitsubishi camp, however, said 100 percent production is not necessary to reach a profit.

"There's no plant in the world that's running at 100 percent," Irvin said. "You set it up to be as efficient as it can be. That's what we have done."

First things first, the company must increase sales.

In 2005, Mitsubishi sold about 124,000 vehicles in the United States, down about 23 percent from 2004.

Co-CEO Hiroshi Harunari said in Detroit that Mitsubishi didn't have a projection for 2006 sales but hopes the six new vehicles will spark a Mitsubishi-buying trend in America.

"The company will continue to take steps to normalize sales operations, raise operating efficiencies and increase profit opportunities by actively promoting exports from MMNA's Illinois factory to other markets," Harunari told the crowd at the Detroit auto show.

Reason to be upbeat

The return to profitability is a large-scale effort. No one vehicle can do it.

Still, the potential impact the redesigned models could have on U.S. sales gives workers in Normal reason to be upbeat.

"Everyone's excited about the Spyder because it puts a new product out at the plant. You can't get into a vehicle of that caliber for that amount of money," said Ralph Timan, president of United Auto Workers Local 2488, which represents employees at the plant. "Unfortunately, sales will dictate what the production is out there."

Company officials expect the Eclipse Spyder to account for about 20 percent of the Eclipse's overall sales. The company will ship around 2,000 Spyders to dealers in late March, Gilligan said, and then build more as demand requires. While that seems small, the Spyder's main function is to drive the Mitsubishi image and spark sales of other vehicles.

"(The convertible) is really a niche product. It's not going to carry a company, but it can be really helpful getting recognition," Cole said. "It can certainly help with image and turnaround."

The company is counting on that.

"Emotion is the essence of the Mitsubishi brand. Mitsubishi: 'Driven to Thrill,' " said Dave Schembri, MMNA vice president of sales and marketing, quoting the company slogan. "Mitsubishi is going pedal to the floor with thrill."

The last few years have been emotional indeed - fueled by a recall scandal involving MMNA's parent company, Tokyo-based Mitsubishi Motors Corp. - that affected the credibility of its U.S. vehicles. A poor-credit-no-problem deal also backfired when some buyers couldn't make payments, forcing nearly new Mitsubishi vehicles to be repossessed and creating a glut of used vehicles in the market. The subsequent drop in sales led to the local layoffs.

But that's in the past, and Normal employees point out the recall scandal - though it tarnished the Mitsubishi brand around the globe - happened on the other side of the world.

"There's a lot of personal pride in our products, and that is evident in the quality of the vehicles," Timan said.

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