Daimler Plans to Raise Its Stake in Mitsubishi

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Daimler Plans to Raise Its Stake in Mitsubishi

By Takaya Yamaguchi
Reuters TOKYO -- DaimlerChrysler plans to raise its stake in troubled Japanese affiliate Mitsubishi Motors Corp. to over 50 percent from 37 percent as early as next business year, said a Mitsubishi group source.

DaimlerChrysler is hoping to secure around 700 billion yen ($6.64 billion) in rescue funds for Mitsubishi Motors, which is reeling from losses resulting from a strategy of offering easy auto loans to boost U.S. sales, other sources have said.

Mitsubishi Motors, Japan's only unprofitable car maker, is scheduled to announce a new restructuring plan on April 30, centering on a large capital infusion by its main shareholders.

If DaimlerChrysler takes a majority stake in Mitsubishi Motors, it will be the first time that a foreign automaker has made a major Japanese automaker a fully consolidated unit.

The German-U.S. automaker had repeated recently that consolidating Japan's fourth-largest automaker into its books was a possibility as long as Mitsubishi Motors reached sustained profitability and significantly reduced its debts.

Mitsubishi Motors' net automotive debt stood at around 726 billion yen six months ago, while total interest-bearing debt amounted to 1.14 trillion yen.

The source said DaimlerChrysler would likely wait to raise its holding in Mitsubishi Motors until at least the year beginning in April 2005, since the automaker would probably book heavy restructuring charges and post a net loss in the current business year ending next March.

The source said three Mitsubishi group firms -- Mitsubishi Corp, Mitsubishi Heavy Industries and the Bank of Tokyo-Mitsubishi -- would provide around 100 billion yen ($947.9 million) in financial aid.

Other Mitsubishi group companies, including Mitsubishi Electric Corp., Nippon Yusen KK and Tokio Marine & Fire Insurance Co. -- a unit of Millea Holdings Inc -- have also been asked to provide aid, the source said.

The amount of the planned capital increase and the number of new shares to be issued is likely to be decided by the end of this week, he added.

For other funding needs, Mitsubishi Motors is also planning to ask the state-owned Development Bank of Japan for loans, sources have said.

Mitsubishi shares shot up 8.07 percent to 348 yen by late Tuesday morning. They have jumped some 30 percent this month as expectations have grown as to the size of the bailout.