TOKYO -- Shaken by a cover-up scandal and a spate of recalls, Mitsubishi Motors Corp. on Wednesday said it will slash paychecks and reduce other costs to make up for an expected plunge in car sales.
Chief executive Yoichiro Okazaki said the series of recalls since a corporate turnaround plan was announced last month will likely reduce domestic sales for the fiscal year ending March 31, 2005 to 220,000 vehicles. That's a 40 percent drop from the previous year and down from the initial target of 300,000.
The Tokyo-based automaker expects a similar sales decline in the next fiscal year, trimming 60 billion yen ($548 million) from the company's operating profit this year and next.
Executives' salaries will be cut by a quarter to a half, while rank-and-file workers' wages will be cut by 5 percent for the next two years as part of a plan to trim costs by 72.6 billion yen ($663 million) this fiscal year and next, the company said Wednesday.
These moves are in addition to the cost-cutting efforts announced May 21 that included cutting nearly 11,000 jobs, or a quarter of its work force, over three years and closing a Japanese plant.
The reputation of Mitsubishi Motors was already tarnished by a recall cover-up scandal spanning decades that emerged in 2000. But in recent weeks, it has admitted it continued to hide defects in recent years and announced recall after recall, affecting some 370,000 vehicles and most of its models.
Its truck affiliate, spun off last year, is recalling 450,000 trucks and buses for dozens of defects it had concealed for years.
"We are confident we have now come clean," Okazaki told reporters at Tokyo headquarters, reiterating that he saw the turnaround plan announced May 21 as the "last chance" for Mitsubishi Motors' survival.
But analysts said prospects for Mitsubishi Motors remain dubious.
"There may be further recalls, and car sales are very sensitive about such scandals because of possible accidents that could mean life or death," said Shinji Kitayama, auto analyst at Shinko Securities in Tokyo.
Even the target of 220,000 vehicles may be too ambitious, he said.
Under Wednesday's revisions, the company will forego retirement allowances for directors and the year-end bonus for employees. The salary cuts do not apply to workers in the United States, where Mitsubishi Motors has a car plant in Normal, Ill., although pay and job cuts are being considered there, Mitsubishi official Hideyasu Tagaya told reporters.
Suffering from deep losses and debts of more than 1 trillion yen ($9 billion), Mitsubishi Motors announced a plan last month to cut 10,900 jobs over three years, close a car plant in Japan and receive a cash injection of 450 billion yen ($4 billion) from several investors including conglomerate Mitsubishi, one of the automaker's owners.
The Mitsubishi group of companies includes Mitsubishi Heavy Industries, trading company Mitsubishi Corp. and Bank of Tokyo-Mitsubishi.
In April, U.S.-German partner DaimlerChrysler AG, which owns a 37 percent stake in Mitsubishi Motors, said it was no longer willing to pump cash into the Tokyo-based automaker.
The latest steps include a speeding up of job cuts to 140 in fiscal 2004 and 250 in fiscal 2005, all in Japan. The overall target of 10,900 job cuts over three years will not change, it said.
The company will also reduce expenses in advertising, head office operations and research in Japan. Overseas, it will halve costs related to outsourcing, travel and computer systems.
Katsuhiko Kawasoe, the former president of Mitsubishi Motors, and five other former Mitsubishi officials have been arrested on suspicion of professional negligence resulting in death. They were arrested in an accident in 2002 in which a Mitsubishi truck crashed and the driver died due to brake failure suspected of being linked to the clutch defects.
Five current and former Mitsubishi officials have also been charged with a number of offenses, including professional negligence resulting in death, over a separate accident in 2002 in which a pedestrian was crushed to death by a wheel that flew off a Mitsubishi truck.