Mitsubishi Woes Could Impact Dundee

TRAVERSE CITY, MI – Mitsubishi Motors Corp.’s financial woes may be spilling over into its partnership in the Global Engine Mfg. Alliance LLC’s plant in Dundee, MI.

Executives at the troubled Japanese auto maker are looking at future product plans and determining which vehicles to build and which to scuttle.

Those decisions could determine whether Mitsubishi fulfills its engine volume commitment to Dundee, or whether the plant will have to look elsewhere to take up the slack, Bruce Coventry, president of GEMA, tells Ward’s during an interview at the Management Briefing Seminar here. (See related story: Global Engine Saves DC $100 Million)

GEMA operates the plant as part of a joint venture between Mitsubishi, DaimlerChrysler AG and Hyundai Motor Co. Ltd. Coventry acknowledges Mitsubishi is studying whether it will take the full 15% capacity allocation it has reserved at the plant.

GEMA President Bruce Coventry

“They (Mitsubishi) are in the midst of trying to go through top to bottom assessment of their product program,” Coventry says.

“We’ve been working very closely with them to try to look at what options there are available (in terms of volume changes). What they have been looking for are potential options. At this point, I think it’s probably too early to say whether or not that is going to be the case.”

Coventry says Mitsubishi is not considering scrapping its involvement in GEMA, but rather whether it needs to delay achieving full engine capacity at the plant.

Regardless of the decision, Coventry says the auto maker has a contractual obligation to take the 15% volume allotment, and that the contract will be enforced.

“It’s just like our Tritec plant with BMW (AG in Brazil),” he says. “We’re not taking our full volume there, but we have an obligation, just like Mitsubishi has a contractual obligation here. They’re signed up for a percentage of the volume, and contractually they are obligated to take that.”

All the same, GEMA is considering alternatives in the event Mitsubishi does make radical changes in its engine volumes.

“One scenario is that Mitsubishi’s volume goes down – certainly not to zero – but goes down,” Coventry says. “Another scenario is that Hyundai would come in and offset that volume with the need to take engines for its Montgomery (AL) plant. Another scenario is that we (DC) could always increase our capacity reservation or could take more engines on a year-by-year basis.”

Additionally, GEMA is studying the possibility of selling engines to an outside auto maker to make up any potential volume losses.

Coventry says it would be “premature” to outline any initial discussions broached with potential third parties at this time, although he admits there have been some discussions with DC’s Mercedes-Benz unit.

“We (GEMA and Mercedes are looking) at all options,” he says. “The product program is being assessed on an annual basis, and it’s looking across the globe. We look at any potential applications at this point.”

One stumbling block could be engine size. GEMA is set up to produce engines ranging from 1.8L to 2.4L, which Coventry says may not be suitable for Mercedes vehicles.

However, as Mercedes looks to expand its entry-level lineup in the U.S. with the all-new A-Class and other models, GEMA’s engines could be the answer.

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