Mitsubishi dealt blows by S&P, insurance companies
Reuters / June 21, 2004
TOKYO -- Ailing Mitsubishi Motors Corp. took a fresh beating
Monday when a ratings agency said the company's existence was in
question and Japanese insurance companies said they may demand
compensation for damages they had paid on company's cars.
Credit rating agency Standard & Poor's cut its rating on
Mitsubishi's bonds deeper into junk territory, down to CCC+ from
B-, with a negative outlook, after Japan's fourth-largest
automaker revealed more safety defects.
"Recent disclosures of additional safety defects -- which have
led to further damage to MMC's already weak brand image and
plummeting domestic sales -- call into question MMC's viability,"
S&P credit analyst Chizuko Satsukawa said in a report.
"It is increasingly unclear whether pending operational and
financial restructuring measures will be sufficient to ensure
MMC's survival," she said.
The scandal-plagued automaker only last week announced additional
cost cuts for its month-old revival plan after evidence of past
defect coverups surfaced at Mitsubishi and its truck affiliate,
further damaging already-weak domestic sales.
It was already facing a shaky future despite a $4 billion rescue
package announced May 21 -- which did not include aid from 37
percent-owner DaimlerChrysler AG. The German-U.S. auto giant had
already given up on Mitsubishi's rehabilitation.
Exacerbating financial woes for Japan's only loss-making
automaker, insurance companies said Monday that they were
reviewing their records and may seek compensation if accidents
involving Mitsubishi's vehicles were found to have been caused by
defective parts. "We have embarked on a review with the aim of
exercising our right to compensation," said Takaki Yamaguchi,
spokesman for Mitsui Sumitomo Insurance Co.
Sompo Japan Insurance also said it was conducting a review. The
insurance companies said, however, that this was normal procedure
following revelations of possible defects.
"One significant fear is a rash of court cases that just drags
out this PR nightmare and doesn't let this company get on with
rebuilding its image," said auto analyst Kurt Sanger of ING.
Mitsubishi said last week that it would do more to slash costs,
such as cutting employee salaries and foregoing retirement
allowances for executives, as well as executing deeper reductions
in marketing, development and other costs.
Through these steps, Mitsubishi aims to slash another $314.4
million in costs in the business year to next March and $352
million next year, for total additional savings of $669 million.
It had originally earmarked cost cuts of $507 million this year
and $903 million next year.
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