(Adds analyst comments)
By Edwina Gibbs
TOKYO, July 24 (Reuters) - Mitsubishi Motors Corp slashed its half-year and full-year earnings outlook on Thursday, battered by special loss charges at its North American finance unit and weak sales in the U.S. market.
Unveiling numbers that surprised and worried analysts, Japan's fourth-largest automaker said it would fall deep into the red for the half-year, forecasting a group net loss of 80 billion yen ($673.7 million) for the April-September period.
It had earlier projected a profit of 10 billion yen.
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, 37 percent owned by German-U.S. auto giant DaimlerChrysler AG , cut its group net forecast to 10 billion yen from 40 billion yen.
But analysts said Mitsubishi's full-year projections still appeared overly optimistic as the restructuring automaker appeared to have entered a vicious cycle in the U.S. market, its main earnings pillar.
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.
"In moving to more creditworthy customers, they have seen vehicle sales fall. Because sales have slumped, they have had to bump up sales incentives and cut back on inventories," said Koji Endo, auto analyst at Credit Suisse First Boston.
"Their full-year numbers still look optimistic as it's not clear where the profit is going to come from in the second half of the business year," he said.
The automaker slashed 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.
It also cut its retail sales estimate for North America in the current business year to 340,000 vehicles from 370,000.
The expected sales decline was, however, not evident in first-quarter numbers released earlier on Thursday, with Mitsubishi reporting 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 was 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.
The revised outlook was released after the close of Tokyo share trading. Mitsubishi shares ended up 2.13 percent at 288 yen, outperforming a 0.58 percent gain in the Nikkei average . ($1=118.75 yen) ($1=A$1.52)