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UPDATE 1-Mitsubishi Motors slashes outlook, hit by US woes

By Edwina Gibbs

TOKYO, July 24 (Reuters) - Mitsubishi Motors Corp on Thursday slashed its half-year and full-year earnings outlook, battered by special loss charges at its North American finance unit and weak sales in the U.S. market.

Japan's fourth-largest automaker said it would fall deep into the red for the half year, predicting a group net loss of 80 billion yen ($673.7 million) for the April-September period compared with an earlier estimate of a 10 billion yen profit.

Problems at its North American finance unit continue to plague the company and it said it would have to book a 50 billion yen extraordinary provision.

For the full year, Mitsubishi, which is 37 percent owned by German-U.S. auto giant DaimlerChrysler AG , said it was cutting its group net forecast to 10 billion yen from 40 billion yen.

Mitsubishi has embarked on a wholesale revision of the way it does business in the United States, concentrating on credit-worthy clients and stepping up debt-collection efforts.

Mitsubishi, which relies on the U.S. market for much of its earnings, cut its operating profit outlook for the full year to 60 billion yen from 90 billion yen, with brutal price competition and hefty sales incentives from U.S. automakers expected to take their toll.

"In North America, Mitsubishi forecasts a delay in the full-scale recovery of the U.S. economy, which places additional competitive pressure on all manufacturers in the incentive-driven market," the company said in a statement.

It said that it was cutting its retail sales estimate for North America in the current business year to 340,000 vehicles from 370,000.

However, Mitsubishi said that first-quarter group sales rose 3.5 percent as strong gains in Asia offset a fall in the U.S. market.

Group sales came to 607 billion yen for the April-June period compared with 586 billion yen a year earlier. The results came as little surprise as sales volumes are announced monthly.

Mitsubishi is announcing quarterly figures for the first time this year, as required by new disclosure regulations in Japan.

The company also announced it would invest A$230 million ($152 million) in a new Australian research centre over five years to help develop Mitsubishi vehicles for world markets, including two new models due for release after 2005.

The investment announcement fulfilled the company's promise last year to build an R&D centre in South Australia and spend A$900 million upgrading its car plant there. ($1=118.75 Yen) ($1=A$1.52)