Mitsubishi Motors rode Asia, new models and a ¥540bn group rescue back to profit

By late 2004 Mitsubishi Motors was close to finished. Years of systematically hiding fault records and secretly repairing vehicles had surfaced in waves of recalls; sales fell 41% during 2004; and DaimlerChrysler, its 30% shareholder, refused to put in more money in April 2004 and wrote the stake off. The January 2005 funding round was the third bailout in eight months.

The reset came on 28 January 2005: a ¥540bn package in which Mitsubishi Heavy Industries, Mitsubishi Corporation and Mitsubishi Tokyo Financial Group injected ¥270bn of equity, backed by ¥240bn of new loans and a ¥30bn asset sale. All three top executives left; Takashi Nishioka took over as chief executive and installed Osamu Masuko, a Mitsubishi Corporation man and an outsider to the car business, as president. The same day MMC announced an advanced cooperation deal with PSA Peugeot Citroën.

The revival plan cut forecasts to levels the company could hit — sales of 1.337m vehicles for fiscal 2004, well under the 1.4m promised months earlier — and aimed for ¥8bn of net income in fiscal 2006 and 'sustainable profitability' in fiscal 2007. It also paid to bury the recall legacy: ¥74.7bn in compensation to Mitsubishi Fuso investors and ¥25.2bn of free inspections for owners.

Fiscal 2005 brought the first operating profit in three years, ¥6.8bn against a ¥128.5bn operating loss a year earlier, with the net loss shrinking to ¥92bn; president Masuko pointed to the new Outlander and i models as the first step in regaining customer trust. In fiscal 2006, ended March 2007, MMC turned a net income of ¥8.7bn — its first year in the black at operating, ordinary and net level since fiscal 2002 — on sales of ¥2,203bn, beating the plan's ¥8bn target.

FY2006 net income of ¥8.7bn — profitable at operating, ordinary and net level for the first time since fiscal 2002 — on sales of ¥2,203bn.

The ¥270bn equity injection came from companies with a decades-old keiretsu stake in keeping the automaker alive — patient money, not a distress fund demanding quick returns.

Leadership was cleared out completely: chairman, CEO and president all left, and an outsider with trading-house discipline got the operating job.

Targets were re-based on achievable volume after a year of overstated forecasts; the plan explicitly aimed to eliminate foreseeable downward risks before promising profit.

The recall legacy was paid down up front — compensation and free inspections — rather than carrying unresolved trust debt into the recovery.

Growth was rebuilt where MMC had real products: the Outlander, i and Lancer line-up and Asia/emerging-market demand, instead of the collapsed US and Japan volume.

A rescue only works when the group puts in enough money to stop the bleeding and the company resets to targets it can actually hit; overstretched forecasts had already burned a year of credibility.

The plan kept its promises: for fiscal 2007 MMC forecast another ¥20bn of net profit on sales up 7.4% to 1.32m vehicles, driven by the new Outlander and Lancer. The company stayed independent and in profit for the rest of the decade — though the crisis-and-reset pattern returned in 2016, when a fuel-economy scandal broke and Nissan took a 34% stake to make MMC part of its alliance.