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Mitsubishi faces make-or-break 2005 -

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Mitsubishi faces make-or-break 2005

Reporter: Mike Sexton

KERRY O'BRIEN: It's well documented that 2004 has been a horror year for Mitsubishi Motors.

As Australia heads toward a record volume of new car sales, Mitsubishi sales have fallen, resulting
in reduced production at its Adelaide plant.

But any domestic woes Mitsubishi has suffered are nothing compared with its parent companies
overseas.

In Japan, vehicle recalls have been so scandalous that some senior executives face criminal
charges, while in the United States, a combination of events has seen Mitsubishi's market share
halve.

A major restructuring is well advanced and, earlier this year, resulted in the closure of one of
the company's two South Australian plants.

So Mitsubishi finds itself facing a make-or-break year with the launch of its long-awaited new
model.

Mike Sexton reports on how Australia's fourth car maker is fighting back.

MIKE SEXTON: It's not every day you see an Australian CEO putting on make-up and stepping into the
spotlight, but for Mitsubishi Australia's Tom Phillips, desperate times call for desperate
measures.

TOM PHILLIPS, CHIEF EXECUTIVE, MITSUBISHI AUSTRALIA: People have said I've got a good head for
radio, so we'll see how it comes out.

MIKE SEXTON: This week, the slightly self-conscious boss of Australia's fourth car maker was
recording what will be a multimillion-dollar campaign to relaunch the company in the new year.

TOM PHILLIPS: I am not in the Gold Logie stakes, but I love the company, I love the products, I
love the people and I just want to do whatever I can to turn this thing around.

MIKE SEXTON: And when it comes to turnarounds, this is of titanic proportions.

Over the past two years, Mitsubishi's global operations have hit one iceberg after another.

While poor marketing and finance decisions have crippled sales in America, a series of scandals in
Japan have rocked the parent company.

After a spate of fatal accidents, executives who allegedly covered up safety defects are now facing
criminal charges, sending sales there plummeting.

CHIZUKO SATSUKAWA, STANDARD & POORS: We are not optimistic at all.

It may take long to see sales recovering, because once consumers have lost confidence in the safety
of their vehicles, it's just too hard.

MIKE SEXTON: Even though none of the vehicles manufactured by Mitsubishi Australia has been
implicated in the safety scandal, doubts about the parent company's future have hit hard
down-under.

TOM PHILLIPS: Unfortunately, when there is a bad story, we always seem to get implicated in some
way.

The inference is that because there's a bad situation in Japan, in a lot of cases the story has
come out that this could mean the end of manufacturing in Australia or it could mean the withdrawal
of Mitsubishi from Australia in total.

That's been very hard to combat.

MIKE SEXTON: A crisis of confidence is not an easy thing to overcome in a market where consumers
make decisions based very much on emotion and perception.

Mitsubishi's own research shows that 80 per cent of Australians believe the company is going out of
business, a perception that has stalled sales and allowed a stockpile of unsold cars to grow.

TOM PHILLIPS: The Magna is not selling to the extent that we want.

There are many reasons for that.

Some of the reasons are due to this uncertainty about our future.

JOHN MELLOR, GOAUTO.COM: One of the problems they are having is that people think that if they
close their plant in Adelaide, then that will mean the company will leave the market and the cars
will not be supported.

But as we all saw with Nissan when Nissan did that particular thing, yes, it took a sales dive for
a while, but, in fact, Nissan is now the number three selling car in Australia.

MIKE SEXTON: Mitsubishi now believes its future relies on getting on the front foot and convincing
the market that, having survived a brutal restructuring by the parent company which saw one of the
two Adelaide plants close with the loss of more than 1,000 jobs, they are now here to stay.

The key component of the corporate strategy is offering a five-year guarantee on all its vehicles.

MARK BORLACE, ROYAL AUTOMOBILE ASSOCIATION OF SOUTH AUSTRALIA: It will be the best in the industry.

There's, I think, only one other manufacturer offering five years.

Nearly everybody else is only offering three, and some of the Europeans are offering two years, so
for private buyers who do keep cars for five years, the offer of a five-year warranty is probably
going to be material in some of their decisions.

TOM PHILLIPS: What we're trying to do is demonstrate our confidence or give confidence to our
customers that if they buy a Mitsubishi today, then they are going to be looked after well into the
future.

And this might be in spite of the fact that we may - in the most dire circumstances, if we did pull
out of manufacturing, we're still going to be importing and selling Mitsubishi products, so our
people are going to be looked after and any warranty that we give is certainly going to be
honoured.

MIKE SEXTON: Mitsubishi believes the cost of offering such a deal will be insignificant when
compared to the message it sends to the market.

Technical services manager with South Australia's Royal Automobile Association Mark Borlace
believes engineering has never been a problem for Mitsubishi in Australia so the company isn't
taking a risk backing its products.

MARK BORLACE: I don't think you go into five-year warranty commitments unless you legitimately are
planning to stay here, and I think it's probably about as good a strategic decision you can make to
satisfy the market that our product's okay and we're going to stay.

CHRIS HALL, MANUFACTURING MANAGER: That white car that's being pulled out of the buffer system
there will go on the line, but two hours ago our suppliers have been told, "Please deliver parts
for that car."

There is a certain irony that, amid the gloomy forecasts, Mitsubishi's manufacturing plant has
never looked so good.

In the past year, they've spent $600 million retooling the factory, making it a state-of-the-art
facility.

Among the new robots and assembly-line innovations is this $40 million press which will soon be
punching out the body shell of the long-awaited replacement for the Magna.

CHRIS HALL: In terms of our future, this is the best thing we've ever installed.

Not only is it capable of producing our new model, but the size of the equipment is such that we
will be able to produce a whole range of different models, should they become available in the
future.

JOHN MELLOR: Will it save it in the future?

Nothing will save it if they can't get the volume right.

MIKE SEXTON: Independent industry analyst John Mellor believes Mitsubishi is positioning itself
well for the future by making its plant adaptable enough to take on more work.

JOHN MELLOR: What they now need to do, they've got this great flexible car plant - they are going
to put the Magna in there, put that on the market here, look for some export markets for that, They
will need another car to go in there at some point to make that factory viable.

MIKE SEXTON: No-one is in any doubt that the as-yet unnamed new model, due late next year, could
represent the final throw of the dice.

TOM PHILLIPS: If we went through 2005 with the same attitude in the marketplace as we have right
now, then the new car will be a failure.

MIKE SEXTON: All of which is why Tom Phillips finds himself as the front man - an idea that grew
from feedback showing that, having weathered the storms of the past few years, he is seen as a
credible face of Mitsubishi Australia.

So while he may not have a face that launched a thousand ships, he's hoping at least it could sell
some Magnas.

TOM PHILLIPS: It's a good message, and we are just trying to put out there our high level of
confidence for our products and our future, so hopefully we'll get it all together and people will
get the message.

REPORTER: But Bert Newton is not in any danger?

TOM PHILLIPS: Bert's not in any danger, no.

I don't want to do this for a living!

KERRY O'BRIEN: A blunt and sober message from the top of Mitsubishi.

Mike Sexton with that report.