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The Honolulu Advertiser
Posted on: Thursday, July 22, 2004

Mitsubishi plans cuts at U.S. plant

By Jan Dennis
Associated Press

NORMAL, Ill. — Struggling to negotiate through plunging sales, bad credit losses and recall scandals, Mitsubishi Motors is planning to cut about 1,200 employees from its only U.S. plant this fall as part of a global reorganization plan.

The Japanese automaker announced yesterday that it would trim about a third of the jobs at its central Illinois plant, cutting production from two shifts to one in October. The Normal, Ill. plant currently employs more than 3,100 workers.

The company, which has about $9 billion of debt on its books, already has announced it would trim almost a quarter of its global work force over the next three years.

Finbarr O'Neill, chairman and chief executive of Mitsubishi Motors North America, said production at the Normal plant had to be adjusted as the company tries to rebuild sales that have dipped nearly 27 percent in the United States for the first six months of 2004.

The company called the decision a difficult one, but said in a statement that "it is necessary for the long-term success of the company."

United Auto Workers Local 2488 president Ralph Timan said in a statement that the union would work with Mitsubishi to keep the company "financially viable while also making sure the least number of members are affected by this news."

Plant spokesman Dan Irvin said workers were notified yesterday.

The head of an automotive research group said layoffs were the company's only option as sales plunged.

"It's a difficult decision, but it's not a hard one to make. If the market isn't there, the only thing you can do is take costs out," said David Cole, president of the Michigan-based Center for Automotive Research.

Officials said the layoffs will be a blow to the local economy, but they predicted the cuts can be absorbed by a diverse economy in which Mitsubishi was second to State Farm Insurance's 12,000 employees among Bloomington-Normal employers.

Rumors of job cuts have swirled at the plant since May, when Mitsubishi announced a reorganization plan to pare massive debt fueled by bad credit and recall scandals.

Worldwide, the plan will slice almost 11,000 jobs over three years and close plants in Japan and Australia.

The reorganization plan, which Chief Executive Officer Yoichiro Okazaki called "our last chance to survive as an automaker," also includes a $4 billion infusion from its parent company and other investors.

Mitsubishi's sales have plunged amid recall scandals in Japan and a zero-percent financing strategy in the United States that backfired when many borrowers defaulted on their payments.

Production has dipped more than 22 percent through June at the Normal plant, which produces the Galant, Eclipse and Endeavor for Mitsubishi and the Dodge Stratus and Chrysler Sebring.

Mitsubishi's deal to build cars for partner DaimlerChrysler expires in 2005 and will not be renewed, according to the companies.

The Normal plant built 53,174 cars during the first half of 2004, down from 68,537 during the same period a year ago, the company reported.

Mitsubishi has trimmed production, workers and halted a planned expansion project at the plant since once-rising sales began to dip in mid-2003.