Commentary

Mitsubishi Shuts Production - But Not Sales - In U.S.

Mitsubishi Motors is ending production of its Outlander Sport crossover SUV in the U.S. and will close its only plant here, in Normal, Ill., if it does not find a buyer. At a news conference in Japan this morning, president and COO Tetsuro Aikawa said the decision is “strictly due to dwindling output in recent years” and is not related to labor costs or foreign exchange rates, Reuters’ Minami Funakoshi reports.

“Aikawa said he thought finding a buyer for the plant would be relatively easy because demand for cars in the buoyant U.S. market was strong,” Funakoshi writes.

It expects to end production at the 2.4 million-square-foot plant — the equivalent of 50 football fields — by the end of November. About 1,250 people and 400 robots are employed there.

advertisement

advertisement

Mitsubishi is the “only foreign-owned plant on U.S. soil that employs a union workforce” reportsCar and Driver’s Clifford Atiyeh. “The Japanese automaker’s contract with the UAW was up for renewal next month but negotiations had not yet begun.”

All this is pending a final board decision on July 30, according to Bloomberg’s Jie Ma, who writes that the Outlander Sport will be exported to the U.S. from the company’s Okazaki plant in Japan. “A slump in Russian demand since last year also dented output at the Illinois factory, which produced vehicles for export,” Ma reports.

The “plant was part of a wave of Asian-brand joint-venture auto plants in North America that opened in the 1980s and 1990s to do whatever was necessary to crack the all-important U.S. retail market,” writes Lindsay Chappell for Automotive News. And the decision to abandon it “illustrates an emerging new-world order in car production.”

Like “Mazda, Toyota, Subaru, Isuzu, Suzuki and, briefly, Hyundai” before it, Chappell reports, it has succumbed to “the new reality” and is “shifting to more cost-efficient global platforms and world supply bases that serve multiple markets.”

Another reality is that Mitsubishi “has less than 1% of the U.S. market, putting it way behind the likes of Toyota Motor,” as Nikkei reported in breaking the story of the impending announcement on Friday. Mitsubishi sold 7,963 vehicles in June, while Toyota sold 209,912 and Honda sold 134,397, according to an AFP story that reports that the Outlander Sport accounted for about half of the total.

“Mitsubishi Motors will be the first major Japanese automaker to end output in both the U.S. and Europe,” according to Nikkei. “It withdrew from Australian production in 2008 and sold off a facility in the Netherlands to a manufacturer there at the end of 2012.”

But the company also said in a statement, “the North American market remains a priority for Mitsubishi Motors. We will continue to sell Mitsubishi cars, including current and planned models, at Mitsubishi dealerships across the United States.”

The automaker has been “the sixth-biggest employer in the Bloomington-Normal area, with 1,280 full-time employees, according to the website for the Bloomington-Normal Economic Development Council,” the Chicago Tribune’s Becky Yerak and Alejandra Cancino write

Normal is about 150 miles south of Chicago. The plant opened in 1988 with the help of $249 million in state and local subsidies as a joint venture between Mitsubishi and Chrysler; Mitsubishi took full control in the 1990s.

“The Normal plant was producing more than 200,000 vehicles a year in the late 1990s and early 2000s, generating about $320 million annually to the local economy, according to the company, Steve Tarter writes in the Peoria Journal Star. “But Mitsubishi wasn’t setting sales records like other Japanese automakers such as Toyota and Honda. In 2004, Mitsubishi laid off almost one-third of its 3,000 employees at the Normal plant.”

Mitsubishi only built about 70,000 cars in Normal last year but HIS auto analyst tells Tarter there is “a decent chance” Mitsubishi will find a buyer.

“It still will be a challenge but you’ve got a good location and there are already auto suppliers there,” he says. Plus, with 17.5 million new cars expected to be sold in the U.S. this year, the industry is facing capacity issues.

One thing that’s for sure: automobile production is faring better than the infrastructure that is expected to support all those vehicles hitting the roads.

Next story loading loading..