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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?
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