A recent article in the Wall Street Journal featured Mitsubishi's continuing problems and the manner in which it is choosing to deal with the myriad of issues surrounding its cloudy future (WSJ, Jan. 20, Mitsubishi Group to Give Car Maker $3 billion Bailout).

The $3 billion bailout comes on the heels of $5 billion anted up earlier by the same group to reduce Daimler's stake in the company. During an interview at the time, Mitsubishi's president Hideyasu Tagaya said Daimler no longer had the power to decide what Mitsubishi Motors does. He went on to declare that the cultures of the two organizations didn't mix well. The scope of Mitsubishi's problems and the rhetoric supporting the bailout brings to mind a couple of observations.

First, it is amazing that anyone could justify to their shareholders the sanity of investing $8 billion dollars in a division that is on course to lose over $2 billion in this current fiscal year. As the efforts of Sarbanes-Oxley globalize, anyone can be on the receiving end of the difficult question, "What were you thinking"? According to CSM Worldwide, a Farmington Hill, Mich. Research firm, the infusion of more money comes at a time when the world-wide excess capacity of vehicle production is estimated to be over 24 million and growing. Interestingly, those involved in the pell-mell expansion of Chinese capacity appear headed for the same "What were you thinking?" confrontation.

Maintaining Mitsubishi's production of 1.4 million annually seems contrary to those of us who try to value a company's upside potential. One of the key questions asked when doing upside due diligence is, how capable is the market in supporting the business if it could reduce its costs or increase it sales? An existing overcapacity situation that, in the automotive industry, is nearly 1½ times larger than U.S. actual sales places huge obstacles in front of Mitsubishi's chances of returning investors' money anytime soon.

Second, the Mitsubishi bailout and proclamations of "A responsibility to Society" by its chairman, Yoichiro Okazaki, harkens back to other, often misguided, attempts to preserve a way of life that had become obsolete. Japan has recently shown a refreshing willingness to let poorly performing businesses to fail. Yet, Mitsubishi is being kept afloat somewhat similarly to those who benefited from the years of regulation in the airline industry. Too often it's the consumer who pays for others' grand gestures toward society. It is becoming clearer that all the consumer wants is a product that is fairly priced, that meets his needs (or wants), and is of good quality.

This becomes less a societal issue than a business culture issue. For Mitsubishi's management to defend its culture against other, more successful automakers starts to sound a lot like trying to resist needed change and asking others to support that resistance under the cloak of some responsibility to society. Meanwhile it is ignoring the radical changes that must take place for Mitsubishi to add value to the society for which they want to be responsible. A review of their revitalization plans demonstrates this clearly.

Nobody wants to hear his baby is ugly. Recognizing the truth can be painful but often represents the first step to fixing the problems. Okazaki San, Mitsubishi is ugly. Your responsibility to society is to face that fact and either fix it quickly or let it fail. Society will ultimately benefit from that action.

Worst yet, it's not the only ugly baby in the nursery. GM and Volkswagen are almost as ugly. If Sarbanes-Oxley doesn't apply for Mitsubishi or Volkswagen yet, it does for GM. GM, what are you thinking?