Mitsubishi Suffers More Cuts

Slashing salaries, freezing new projects and biting into manufacturing budgets are among the latest steps Mitsubishi Motors Corp. finds itself taking, less than a month after announcing its critical revitalization plan (see WAW — June '04, p.32).

These early changes to what new CEO Yoichiro Okazaki has declared as the company's last chance at emerging from financial disaster come in response to a recall scandal at MMC's truck-making affiliate, Mitsubishi Fuso Truck and Bus Corp., that involves the longtime concealment of defects much like the one in 2000 that sent MMC into a tailspin.

These new measures will extract ¥72.6 billion ($664 million) from the books over two years and should offset a forecasted decline in annual revenue of some ¥30 billion ($4.3 billion) for each of the next two years due to recall-related losses.

Among the new cutbacks are reductions in Japanese labor costs by ¥14.1 billion ($128.1 million) this year, and ¥10.9 billion ($99 million) in the 2005 fiscal year. The company is foregoing paying retirement allowances to directors for two years; cutting executive salaries in half, and reducing managers' pay by 10% compared with year-go. Rank-and-file employees will take a 5% pay cut as compared with 2003.