For decades, Mitsubishi competed in various forms of racing, particularly off-road and rally racing, and achieved much success despite not being a major auto manufacturer. In doing so, the company demonstrated its engineering prowess, which spawned generations of vehicles utilizing Mitsubishi’s famed all-wheel drive technologies. In recent years, however, the Japanese brand has skidded into a series of rough patches and has seemingly lost its way in the form of falling sales figures. With much of the competition leaving Mitsubishi in the dust, doubts have arisen over the viability of the Japanese nameplate and many have predicted its demise in the near future. Nevertheless, the company hopes to shake off its critics through a renewed focus on its core strengths, enabling it to turn the corner and get back on the road to sustained profitability.
Mitsubishi Motors North America, Inc. was formed in 1981 and in the span of two decades became one of the fastest-growing automakers in America. In 2002, the automaker achieved 2.01% market share and 345,111 sales in the United States – both record highs – as it strived to sell 500,000 units in America and 2 million globally by fiscal year 2007. The wheels began to fall off in 2003, however, as a “0-0-0” finance offer of 0% down, 0% interest, and no payments for 12 months that had previously given a major boost to the company's new vehicle sales began to backfire on the organization. Many customers who purchased vehicles through the program defaulted on their obligations once payments were due and the company was left with thousands of repossessed vehicles in its possession whose market values were considerably less than what was owed. In the years that followed, the legacy of the incentive program contributed to the company's mounting financial obligations and both new vehicle development and market share suffered as a result.
It was reported at the time that only a mere 2.8% of the automaker’s sales revenues were invested into research and development. Once the losses mounted, the brand’s product offerings suffered and progressively became less competitive in the marketplace as the organization did not have ample cash to apply to areas such as engineering or marketing. Consequently, Mitsubishi made a decision to streamline its product portfolio and retain only the models in which it viewed as vital for its future success in addition to placing an emphasis on electrified drivetrains and utility vehicles. In doing so, the brand ceased production of its Eclipse, Galant and Endeavor models to concentrate on manufacturing core models such as the Outlander Sport, which the company began to export in an attempt to achieve its goal of maximizing the production capacity of its Normal, Illinois plant.
The outlook appears to be improving as the organization forecasted deliveries to climb to 70,000 units in the United States for the current fiscal year, which ends on March 31, 2014, compared to the 57,000 sales it achieved in the previous fiscal year. Coinciding with the positive sales growth is Mitsubishi President Osamu Masuko’s prediction that the automaker’s U.S. subsidiary will possibly break even this fiscal year for the first time in seven years. While cost cutting and strengthening sales have supported the turnaround effort, Mitsubishi Motors Corp. has also benefitted from a weakening yen, which spurred the company to increase its operating profit forecast by 20% to 120 billion yen ($1.2 billion) despite a dip in total sales.
Much work remains to be done, however, as the brand is still faced with the challenge of revitalizing a limited, and somewhat stale, product range. The Outlander Sport utility vehicle has been a big winner for Mitsubishi in recent years and the automaker hopes to replicate that success with its newest offering, the Mirage 5-door subcompact. Targeted towards younger buyers, the Mirage comes in an affordable package and claims an impressive 37 mpg city / 44 mpg highway, which will help raise the product lineup’s average fuel economy. The inexpensive sales price (Mirage pricing starts at $12,995, excluding destination) should also do much to promote sales volume, market share and brand awareness even if the profit margins are relatively thin. More importantly, the small car enables the company to lure younger drivers to buy into the brand, which is vital if Mitsubishi is to rebuild its image in the United States.
Leading the company’s electrification initiative is the i-MiEV, the brand’s electric car, as Mitsubishi is among only a few automakers that currently offers an EV for sale. Despite year-to-date sales of only 1,018 units through November, it can be argued that the model still does much to raise the profile of the brand. The company now has an EV that is a step in the right direction with regards to meeting ever-stringent corporate average fuel economy (CAFE) standards, and the advancements in engineering that went into the car’s development should bear fruit in future models, similar to Mitsubishi’s rally cars and the all-wheel drive technology that resulted from its racing efforts. In addition, after scores of enthusiasts shrieked in fear over speculation that the beloved Lancer Evolution would be discontinued, there is now hope for a successor as the company is rumored to be considering a next-generation model that will utilize a small turbocharged engine complemented by electric motors. With emissions regulations the focus of the brand, its investment in alternative powertrain technology will enable it to merge its rally racing past with its electrified future.
Mitsubishi’s partnership with Renault-Nissan also shows much promise for the Japanese make in its cost-cutting efforts as the three brands announced they will “explore several new projects covering shared products, technologies and manufacturing capacity.” The arrangement will result in two Renault-based sedans for Mitsubishi and the automakers will also collaborate in the development of both a new compact car and an electric car, which should benefit the Japanese brand greatly in its need to expand its product portfolio. As Nissan and Mitsubishi both offer EVs, further cooperation between the two with regards to R&D for electric vehicle technologies appears to be another victory for the Japanese automaker considering its new focus on EVs and hybrids.
In the three-year business plan revealed last month, called New Stage 2016, President Osamu Masuko has called for sales of 150,000 vehicles in North America and 1.43 million units globally. With Mitsubishi Motors Corp. finally on a track towards profitability, the challenge will be to gradually build the brand and grow sales without repeating past missteps. Until proven otherwise, the doubters will continue to predict the brand’s departure in the United States, but for the first time in many years it looks like the automaker is ready to make a move. After quickly reaching its peak just a decade ago, Mitsubishi hopes that its new slow and steady approach will win the race this time around, but the current uphill climb it faces will surely be its biggest test yet.