Japan's Mitsubishi Motors Corp, hitting another pot-hole as it tries to steer toward recovery, posted a huge interim loss on Tuesday and slashed its forecasts for the full year.
Financial troubles stemming from loose loan controls at its North American finance unit, which necessitated a large extraordinary provision, have come as a vicious price war in the U.S market escalated, causing sales there to slump.
A strengthening in the yen is set to further sap earnings and its two latest vehicles at home have not sold as well as expected -- particularly painful for an auto maker with only a limited model line-up.
Japan's fourth-largest auto maker, 37 percent owned by DaimlerChrysler AG, booked a consolidated operating loss of 76 billion yen ($698.3 million) for the six months to September 30, way bigger than the 15 billion yen loss it predicted in July.
Mitsubishi attributed the worse-than-expected result to loan loss charges at its North American finance unit.
As expected, Mitsubishi revised down its full-year forecasts, but the revision for operating income was much worse than analysts had predicted.
"The results were disastrous. We were shocked," said Koji Endo, a senior analyst at Credit Suisse First Boston Securities.
"We doubt if the company can meet its revised full-year earnings target," he added, noting that in order to do so, Mitsubishi would have to post an operating profit in the second half.
It now expects to post an operating loss of 45 billion yen and a net loss of 11 billion yen for the full year.
That compares with its earlier prediction of an operating profit of 60 billion yen and a net profit of 10 billion yen.
Unlike rival Nissan Motor Co, which in the last three years has become Japan's most famous restructuring success story, Mitsubishi has failed to translate aggressive cost-cutting into robust profits.
In North America it found that a significant proportion of its youthful customer base was not paying off loans and it is overhauling its operations there, switching to more credit-worthy clients. That has led to a sales slump plus soaring inventories and sales incentives amid a brutal price war. Some analysts say the company needs a new brand identity now that it has to appeal to older car buyers and compete more directly with heavyweights like Toyota Motor Corp and Honda Motor Co
In Japan, although its retail sales excluding 660cc minivehicles are up by a third this year, analysts say they had been looking for sales to double, boosted by the Colt compact and Grandis minivan.
The death of Chairman Takashi Sonobe last month, an executive who had risen up through the ranks, has added to the company's woes.
Chief Executive Rolf Eckrodt has come from DaimlerChrysler and has been with Mitsubishi for just three years. Chief Financial Officer Keiichiro Hashimoto only joined the auto maker in June from the Bank of Tokyo-Mitsubishi.
Separately, unlisted truck unit Mitsubishi-Fuso, split off from Mitsubishi Motors in January, said its first-half operating profit jumped to 13.5 billion yen from two billion yen a year earlier on a 26 percent jump in sales.
Financial troubles stemming from loose loan controls at its North American finance unit, which necessitated a large extraordinary provision, have come as a vicious price war in the U.S market escalated, causing sales there to slump.
A strengthening in the yen is set to further sap earnings and its two latest vehicles at home have not sold as well as expected -- particularly painful for an auto maker with only a limited model line-up.
Japan's fourth-largest auto maker, 37 percent owned by DaimlerChrysler AG, booked a consolidated operating loss of 76 billion yen ($698.3 million) for the six months to September 30, way bigger than the 15 billion yen loss it predicted in July.
Mitsubishi attributed the worse-than-expected result to loan loss charges at its North American finance unit.
As expected, Mitsubishi revised down its full-year forecasts, but the revision for operating income was much worse than analysts had predicted.
"The results were disastrous. We were shocked," said Koji Endo, a senior analyst at Credit Suisse First Boston Securities.
"We doubt if the company can meet its revised full-year earnings target," he added, noting that in order to do so, Mitsubishi would have to post an operating profit in the second half.
It now expects to post an operating loss of 45 billion yen and a net loss of 11 billion yen for the full year.
That compares with its earlier prediction of an operating profit of 60 billion yen and a net profit of 10 billion yen.
Unlike rival Nissan Motor Co, which in the last three years has become Japan's most famous restructuring success story, Mitsubishi has failed to translate aggressive cost-cutting into robust profits.
In North America it found that a significant proportion of its youthful customer base was not paying off loans and it is overhauling its operations there, switching to more credit-worthy clients. That has led to a sales slump plus soaring inventories and sales incentives amid a brutal price war. Some analysts say the company needs a new brand identity now that it has to appeal to older car buyers and compete more directly with heavyweights like Toyota Motor Corp and Honda Motor Co
In Japan, although its retail sales excluding 660cc minivehicles are up by a third this year, analysts say they had been looking for sales to double, boosted by the Colt compact and Grandis minivan.
The death of Chairman Takashi Sonobe last month, an executive who had risen up through the ranks, has added to the company's woes.
Chief Executive Rolf Eckrodt has come from DaimlerChrysler and has been with Mitsubishi for just three years. Chief Financial Officer Keiichiro Hashimoto only joined the auto maker in June from the Bank of Tokyo-Mitsubishi.
Separately, unlisted truck unit Mitsubishi-Fuso, split off from Mitsubishi Motors in January, said its first-half operating profit jumped to 13.5 billion yen from two billion yen a year earlier on a 26 percent jump in sales.
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