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Mitsubishi reports an 89% drop in annual profit

TOKYO — Mitsubishi will focus on cutting fixed costs by 20% or more in the next two years after reporting an 89% drop in annual profit, its weakest performance in three years, and skipping its year-end dividend. The coronavirus crisis has exacerbated Mitsubishi's struggles in a year where Japan's sixth biggest carmaker was already battling falling sales in China and also southeast Asia, its largest market which accounts for one-quarter of sales. Mitsubishi also said on Tuesday it would focus on growth in ASEAN countries to survive the aftermath of the pandemic. "Before the virus we had been mulling which underperforming regions and vehicle segments to cut our exposure to," CEO Takao Kato told a results teleconference. "In the wake of the virus, we need to pick up the pace of making these changes. To stay competitive in a post-coronavirus market, we need to immediately shrink our area of focus to regions and segments in which we excel." Global automakers are struggling to cope with the crisis, which has pummeled car sales due to lockdowns in many countries. Many automakers have begun to restart vehicle factories, but anemic demand, supply chain disruptions and social distancing measures at factories are expected to limit output. Mitsubishi's operating profit came in at 12.8 billion yen ($119.21 million) for the year to end March, down from 111.8 billion yen a year ago, and its lowest since the year to end March 2017. Profits exceeded a consensus estimate of 9.4 billion yen profit drawn from 15 analysts polled by Refinitiv. The automaker did not give an earnings forecast for the current business year, and did not issue a year-end dividend, compared with 10 yen per share a year ago. The junior member of the automaking partnership between Nissan and France's Renault, sold 1.13 million vehicles globally in the year ended March, down 9%. Mitsubishi will focus on growth in southeast Asia as part of the alliance's plan for each company to expand in their regions of strength. Mitsubishi said it would give more details when it reports first-quarter results. The alliance is expected to announce a revamped strategy on May 27, when it will pledge to increase cooperation to improve joint operations to remain competitive. Related Video:

Nissan didn't have much say in merger talks, but it had what FCA wanted

TOKYO — Nissan wasn't consulted on the proposed merger between its alliance partner Renault and Fiat Chrysler, but the Japanese automaker's reluctance to go along may have helped bring about the surprise collapse of the talks. While Nissan Motor Co. had a weaker bargaining position from the start, with its financial performance crumbling after the arrest last year of its star executive Carlos Ghosn, it still had as its crown jewel the technology of electric vehicles and hybrids that Fiat Chrysler wanted. The board of Renault, meeting Thursday, didn't get as far as voting on the proposal, announced last week, which would have created the world's third biggest automaker, trailing only Volkswagen AG of Germany and Japan's Toyota Motor Corp. When the French government, Renault's top shareholder with a 15% stake, asked for more time to convince Nissan, Fiat Chrysler Chairman John Elkann abruptly withdrew the offer. Although analysts say reviving the talks isn't out of the question, they say trust among the players appears to have been broken. "The other companies made the mistake of underestimating Nissan's determination to say, 'No,' " said Katsuya Takeuchi, senior analyst at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. The Note, an electric car with a small gas engine to charge its battery, was Japan's No. 1 selling car, the first time in 50 years that a Nissan beat Toyota and Honda. Renault and Fiat Chrysler highlighted possible synergies that come from sharing parts and research costs as the benefits of the merger. But what Fiat Chrysler lacks and really wanted was what's called in the industry "electrification technology," Takeuchi said. With emissions regulations getting stricter around the world, having such technology is crucial. Yokohama-based Nissan makes the world's best-selling electric car Leaf. Its Note, an electric car equipped with a small gas engine to charge its battery, was Japan's No. 1 selling car for the fiscal year through March, the first time in 50 years that a Nissan model beat Toyota and Honda Motor Co. for that title. Nissan is also a leader in autonomous-driving technology, another area all the automakers are trying to innovate. "Although Nissan had no say, its cautionary stance on the merger ended up being very meaningful," Takeuchi said.

Japan could consolidate to three automakers by 2020

Sergio Marchionne might see his dream of big mergers in the auto industry become a reality, and an analyst thinks Japan is a likely place for consolidation to happen. Takaki Nakanishi from Jefferies Group LLC tells Bloomberg the country's car market could combine to just three or fewer major players by 2020, from seven today. "To have one or two carmakers in a country is not only natural, but also helpful to their competitiveness," Nakanishi told Bloomberg. "Japan has just too many and the resources have been too spread out. It's a natural trend to consolidate and reduce some of the wasted resources." Nakanishi's argument echoes Marchionne's reasons to push for a merger between FCA and General Motors. Automakers spend billions on research and development, but their competitors also invest money to create the same solutions. Consolidating could conceivably put that R&D money into new avenues. "In today's global marketplace, it is increasingly difficult for automakers to compete in lower volume segments like sports cars, hydrogen fuel cells, or electrified vehicles on their own," Ed Kim, vice president of Industry Analysis at AutoPacific, told Autoblog. Even without mergers, these are the areas where Japanese automakers already have partners for development. Kim cited examples like Toyota and Subaru's work on the BRZ and FR-S and its collaboration with BMW on a forthcoming sports car. Honda and GM have also reportedly deepened their cooperation on green car tech. After Toyota's recent buyout of previous partner Daihatsu, Nakanishi agrees with rumors that the automotive giant could next pursue Suzuki. He sees them like a courting couple. "For Suzuki, it's like they're just starting to exchange diaries and have yet to hold hands. When Toyota's starts to hold 5 percent of Suzuki's shares, this will be like finally touching fingertips," Nakanishi told Bloomberg. "I absolutely do believe that we are not finished seeing consolidation in Japan," Kim told Autoblog. Rising development costs to meet tougher emissions regulations make it hard for minor players in the market to remain competitive. "The smaller automakers like Suzuki, Mazda, and Mitsubishi are challenged to make it on their own in the global marketplace. Consolidation for them may be inevitable." Related Video: