Big loss renews Mitsubishi fears

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Big loss renews Mitsubishi fearsBy George Lekakis
September 11, 2007 12:00am
THE auditor of Mitsubishi Motors Australia has again highlighted "significant uncertainty" about whether the local car maker can continue as a going concern.

In a note to the company's latest financial accounts filed to the Australian Securities and Investments Commission, the directors of Mitsubishi's Australian arm revealed that it had a net current asset deficiency of $168 million.

This disclosure, and the uncertainty about the future of Japanese parent Mitsubishi Motors Corp, caused PricewaterhouseCoopers to make the following statement in its audit report:

"There is significant uncertainty whether the company will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report."
Deep cost cutting and higher sales of imported cars were not enough to push the Australian subsidiary into the black in its latest year.

Accounts for the year to the end of March reveal the country's fourth largest car maker posted a net loss of $118 million.

The bottom line is a 48 per cent improvement on the previous year, when a sharp slide in sales led to a net loss of $226 million.

Disclosure of Mitsubishi's latest result comes on the back of disastrous August sales figures for the locally-built 380 sedan.

Mitsubishi is feeling the impact of dwindling demand for locally-made large passenger cars more than Toyota and Holden because it does not have a large export program.

According to data from the Federal Chamber of Automotive Industries, only 658 Mitsubishi sedans were sold last month -- down 38 per cent on the 1069 in August last year.

Lower than expected sales of the 380 forced production at the Tonsley Park plant in Adelaide to be reduced by more than two thirds last year.

In a written commentary attached to the latest accounts, Mitsubishi's Australian chief executive Robert McEniry indicated that weak export sales and special restructuring costs undermined the bottom line.

"The result was hindered by a continued lack of vehicle exports and lower than expected sales in the domestic market and continued restructuring costs of $33.7 million," Mr McEniry said in the report.

"Issues in the large passenger vehicle segment were further exacerbated by fierce competition between local manufacturers."

Despite these problems, Mr McEniry indicated that Mitsubishi planned to continue producing cars in Adelaide.

"Mitsubishi Motors Australia's manufacturing operations are now 'right-sized' for moving forward," he said.

"The operation is able to maintain low stock levels and meet sales demand, but still has the flexibility necessary to accommodate market shifts."

Recovery in the operating result was mainly due to solid sales growth of imported Mitsubishi models.

Mitsubishi's share of the Australian automotive market stood at 6.2 per cent at the end of March.

Group revenue declined $185 million, or 11.3 per cent, to $1.44 billion, but this was countered by lower writedowns and marketing costs.