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MMC to raise amount of rescue package to £2.7bn

Mitsubishi Motors is set to ask affiliated companies and investors to provide even more money as part of its financial rescue package.

The company is seeking to raise an additional Y96bn (£485m), bringing the total bail-out to Y546bn (£2.7bn) from Y450bn (£2.2bn). JP Morgan Chase, which had already committed to buying Y100bn (£51m) in preferred shares in MMC's original bail-out plan in May, would purchase an additional Y150bn (£75m) in securities.

Phoenix Capital, a Tokyo-based investment fund that will become the carmaker's largest shareholder after purchasing Y70bn (£35m) - Y100bn (£51m) worth of common shares, will also acquire another Y100bn (£51m) in common stock. Phoenix's investment is part of a rescue package for MMC put together after DaimlerChrysler, which has a 37% stake, refused to stump up any more money.

Concerns remain over whether the latest capital increase or any amount of future cash infusions will be enough to save the automaker.

Since outlining its original $4bn (£2.19bn) bail-out plan in May, Mitsubishi has already revised it once. In June it drew up an emergency cost-cutting plan that would accelerate employee lay-offs and slash salaries.

It said it would stop paying retirement allowances to directors, cut executive pay packages by 25-50%, cut managers' pay by 10% and reduce the salaries of regular employees by 5%. In addition, the 2004 year-end bonus will be cancelled.

June vehicle sales also fell 56% year-on-year.

MMC said a decline in domestic sales would cause an additional operating loss of Y30bn (£148m) in both the current year and 2005. To offset the loss, the company would cut overall costs by an additional Y34.4bn (£17m) in the current fiscal year and Y38.2bn (£19m) the following year.



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