updated 7/21/2004 6:48:26 PM ET 2004-07-21T22:48:26

Mitsubishi Motors will lay off 1,200 workers this fall at its only U.S. plant, trimming car production as part of a worldwide revival plan the automaker hopes will pare mounting debts, the company announced Wednesday.

The Japanese automaker, battling losses from bad credit and recall scandals, said production will be cut from two shifts to one in October at the Normal, Ill. plant, which now has more than 3,100 workers.

“This was a very difficult decision, but we believe it is necessary for the long-term success of the company,” Rich Gilligan, president and chief operating officer of Mitsubishi Motor North America’s Manufacturing Division, said in a statement.

Rumors of job cuts have swirled at the plant since May, when Mitsubishi announced a reorganization plan to pare a $9 billion debt fueled by bad credit and recall scandals.

Worldwide, the plan will slice nearly 11,000 jobs over three years — nearly a quarter of Mitsubishi’s global work force — and close plants in Japan and Australia.

The reorganization plan, which chief executive Yoichiro Okazaki called “our last chance to survive as an automaker,” also includes a $4 billion infusion from its parent company and other investors.

Mitsubishi’s sales have plunged amid recall scandals in Japan and a zero-percent financing strategy in the United States that backfired when many borrowers defaulted on their payments. U.S. sales were down nearly 27 percent for the first six months of 2004.

Production has dipped more than 22 percent through June at the central Illinois plant, which produces the Galant, Eclipse and Endeavor for Mitsubishi and the Dodge Stratus and Chrysler Sebring. Mitsubishi’s deal to build cars for partner DaimlerChrysler expires in 2005 and will not be renewed, according to the companies.

The Normal plant built 53,174 during the first half of 2004, down from 68,537 during the same period a year ago, the company reported.

Mitsubishi has trimmed production, workers and halted a planned expansion project since once-rising sales began to dip in mid-2003.

Layoffs — the first at the plant since 1999 — cut 52 nonunion jobs and 225 union positions earlier this year. The company also put a $200 million expansion project on hold last fall. The addition, announced when the company was logging record sales early last year, would have added 300 jobs.

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