31 Oct 2012

Can Mitsubishi North America be Saved?

"New Chairman Announced, But Can Mitsubishi North America be Saved?"

This is an article by American writer Max Prince, who is currently living in the UK and studying for his masters degree in auto journalism at Coventry University. It looks at the operations of Mitsubishi Motors in North America, who appointed a new Chairman this morning.

If you haven't already noticed, Mitsubishi Motors is not doing very well in North America. Actually, they're doing absolutely terribly. Buying a Galant or Outlander in the United States is about as popular as zeppelin travel after 1937. In the most recent of a series of moves attempting to reverse this trend, the company today named Gayu Uesugi, a Mitsubishi board member and executive vice president, as the man responsible for taking over Mitsu's North American operations.
Mitsubishi Lancer Evolution

Best of luck, Mr. Uesugi. You're going to need it.

It's not that he is incompetent in any way - far from it. A quick search reveals that Uesugi is the man behind product strategy in Russia, a market which represents one of the only bright spots in the Mitsubishi storm cloud. Recent news that the Pajero Sport will be produced in Russia during 2013 will no doubt help the company, whose sales in the Motherland during 2011 skyrocketed. Unfortunately, their success in Russia only alleviates a portion of the massive losses elsewhere, like North America, where Mitsubishi looks like an aimless buffalo rapidly approaching the cliff of relevancy.

This year has been another disastrous one for the company, according to James B. Treese of Autonews.com:
  • In North America, [Mitsubishi] lost $14.5 million, vs. a year-earlier profit of $29.3 million, as revenues fell 39 percent to $419.4 million. 
  • Other data for the fiscal first half showed the deterioration of Mitsubishi's position in the United States. Mitsubishi's dealership count dropped to 386 from 397 a year earlier, its market share fell to 0.4 percent from 0.71 percent, and the percentage of nonfleet sales that were financed by Mitsubishi's finance arm slipped to 30 percent from 36 percent. 
  • Fleet sales fell sharply, to 13.6 percent of Mitsubishi's U.S. sales in the latest six-month period from 31.8 percent a year earlier.

But believe it or not, there was a time when North America was Mitsubishi's golden goose. Between 1999 and 2002 sales for the company grew by a remarkable 81%, posting massive gains each year. How did they do this? By controlling the youth market. Just a decade ago, Mitsubishi actually had the largest percentage of under-35 buyers in the United States, more even than the mighty Volkswagen. At the beginning of 2003, Mitsubishi set a lofty goal to increase sales from 348,000 to 500,000 by 2007. 

Mitsubishi Galant SE
At the time, that didn't seem so crazy. What followed was a string of baffling financial moves, including throwing advertisement funds around like Somali shillings and giving preposterous loans to any Generation Y'er without a credit rating or facial hair. North American operations tanked, posting losses every year, finally sinking to a paltry 87,000 sales in 2009; about 0.6% of the regional marketshare. After shooting themselves in the foot, the company simply laid down and bled out in North America. Tracking the automotive astral of the 2000's, one could point to Mitsubishi and say, "Hey! Look kids! A falling star..."

But instead of continuing to blunder around, the company should remember how they originally succeeded in North America. The huge youth following that ushered Mitsubishi into significance was captured by producing fun, affordable and sporty cars with mass appeal. The company moved over 68,000 original Lancers in the US circa 2002, but slumped to just 27,861 one year after the slower, heavier revised model was introduced in 2007. 

Despite the sheer brilliance of prior versions, let's be honest, the $40,000 Evolution X now looks more like an old, bloated King Kong than a baby Godzilla. It doesn't feel like the cult icon of previous generations, and I'm glad the Evo will be phased out after 2013. Good riddance. The most obvious example, though, is the once best-selling Eclipse. With each compromised iteration of the model, sales plummeted. After releasing the supremely un-enthusiast third generation Eclipse in 2002, sales of the model fell from 72,041 to 4,282 by 2010; a decrease of about 95%.

As of now, there is no planned replacement for the Eclipse. To me, this is yet another head-scratcher. Why not bring back the Eclipse nameplate in a totally new version more faithful to its enthusiast roots? Since North American sales began this May, the Subaru BRZ/Scion FR-S model has sold more than 10,200 units. In that same period, the entirety of Mitsubishi Motors North America sold a little over 33,000 cars. 

In the United States, sales of the BRZ/FR-S alone matched 42% of all Mitsubishi model sales. Clearly, there is a market demand. If they can build a quality vehicle for the segment (and resist the temptation to pass out loans like old AOL discs) I see no reason why the company can't compete in North America, as they used to. 

If Gayu Uesugi wants to keep his new job and Mitsubishi wants to avoid being consigned to oblivion, I highly recommend that they start making smaller, exciting, sporty vehicles once again, starting now. Like, this moment. If they're lucky, it isn't already too late.