Rocky Road

Mitsubishi Motors Corp. faces a rocky road after DaimlerChrysler AG says it will not pump any more money into its beleaguered Asian alliance partner, in which it holds a 37.5% stake.

Afterreviewing a proposed Mitsubishi revitalization plan, DC determined the financial commitment versus potential return would be prohibitive.

“The (DC) board of management and the supervisory board decided not to participate in the planned capital increase and not to give further financial support to MMC,” saya Manfred Gentz, DC's chief financial officer.

Shortly after the announcement, CEO Rolf Eckrodt resigned amid speculation DC Chairman Juergen Schrempp's grandiose Asian expansion strategy was unraveling.

DC purchased a 37.5% stake in Mitsubishi in 2000 to further its expansion ambitions in Asia and the following year sent Eckrodt, who hired on with Daimler-Benz AG in 1966, to run the Japanese auto maker.

Eckrodt based Mitsubishi's forecasted recovery largely on success in the then-booming North American market. But a series of global recall scandals, an abnormally high default rate on U.S. loans and weakening sales in the lucrative U.S. market sidetracked the turnaround.

Without the support of DaimlerChrysler, Mitsubishi immediately found itself in crisis mode, crushed by its debt, reported at ¥1.18 trillion ($10.7 billion). The auto maker reported a $675.2 million loss for last fiscal year, ending March 31. Mitsubishi produces just 800,000 vehicles annually.

DC insists that it wants the partnership with Mitsubishi to continue, including a project to design and manufacture 4-cyl. engines and a joint operation with Chrysler Group to develop global platforms for the C and D passenger-car segments. The first vehicles are slated for 2005.

Gentz says DC has no immediate plans to sell off its equity stake in Mitsubishi, although the level of equity likely will be diluted should a future revitalization plan call for the issuance of additional shares.