Mitsubishi Motors Corp is working on a revival plan costing about 250 billion yen ($2.3 billion) with the aim of expanding in Southeast Asia and holding on to its plants in Japan, Mitsubishi group sources said.
Japan's fourth-largest auto maker, mired in huge losses and debt, is under pressure to come up with a restructuring plan after top shareholder DaimlerChrysler AG pulled out of a multi-billion dollar bail-out plan last week.
"Mitsubishi Motors is facing its toughest challenge ever -- one that threatens the very existence of the company," Yoichiro Okazaki, who was appointed president, chief executive and chairman of MMC on Friday, told a news conference.
With DaimlerChrysler refusing further funding, analysts have said MMC would need to tie up with another car maker if its German-U.S. partner decides to sell its 37 percent stake.
Hopes for the possibility of outside help were raised on Friday when the Nihon Keizai newspaper said the Mitsubishi group, which is crafting a new rescue plan for MMC, would seek financial and employment support from cash-rich Toyota Motor Corp.
Toyota and MMC issued denials, but investors cheered the report anyway, driving shares of MMC up 11 percent to 273 yen. Toyota shares fell 1.48 percent, mirroring the broader market.
The newspaper said the Mitsubishi group would formally ask for Toyota's support early next month. MMC has two plants near most of Toyota's production sites in central Japan.
Still with help from Toyota or any other outside source far from certain, shareholders at an extraordinary meeting on Friday expressed concern about MMC's future, demanding to know how Japan's only unprofitable car maker would ensure survival given its tattered brand image and deep financial woes.
The meeting, called before the DaimlerChrysler news, was originally supposed to rubber-stamp a bail-out plan involving the German-American company that sources had said would amount to as much as $6.4 billion.
MMC has yet to recover from a recall scandal four years ago that exposed its decades-long practice of illegally hiding customer complaints, and it faces similar allegations over a design defect in trucks that were involved in accidents, including one that killed a woman two years ago.
The company, buried under interest-bearing debt totaling about $10.4 billion, is expected to post a loss of 72 billion yen ($657 million) for the year to March 31 after the company's easy credit policy in the United States backfired.
Chief Financial Officer Keiichiro Hashimoto sought to quell shareholders' fears, saying a new team of officials from MMC and its three main shareholders in the Mitsubishi group were working out a revival plan that would include securing funding.
Details of the business plan would be announced by the end of May, company officials said.
Most of the funding is expected to come in the form of a capital boost through the purchase of new shares by the three Mitsubishi companies — Mitsubishi Heavy Industries, Mitsubishi Corp and Bank of Tokyo-Mitsubishi — but MMC will also seek external help, company sources said.
Okazaki said he could not comment on the future of jobs and factories. Asked whether MMC would close plants in Australia, as hinted by predecessor Rolf Eckrodt, he said: "We need to find out where capacity is excessive, and if it's too much we need to take specific measures. Right now, we're not at that stage."
The sources, who are involved in the rescue talks, said MMC would not close its Pajero SUV plant in Japan, as had been planned under DaimlerChrysler's lead.
It would also seek to strengthen its operations in the promising Southeast Asian market, investing tens of billions of yen to raise output capacity in the Philippines by more than 10 times to 200,000 units a year, they said.
DaimlerChrysler's decision to pull the plug on MMC has also thrown the German-American auto maker's ambition of creating a global car maker into disarray as it severed its main link to the fast-growing Asian market.
"When DaimlerChrysler was in charge of the restructuring plan, the idea was to look at MMC in terms of what it meant for DaimlerChrysler's global strategy," Okazaki said.
"Now, we're looking at what's necessary for MMC to survive, and there could be some differences between our plan and DaimlerChrysler's."
Hashimoto repeated its partner's line that the two firms would continue their existing operational ventures.
MMC and DaimlerChrysler use a common platform for compact cars, share engine components and cooperate on manufacturing and sales in China, North America and Europe.
MMC confirmed on Friday that Eckhard Cordes, head of DaimlerChrysler's commercial vehicles division, would join its board as a non-executive member.