Mitsubishi President Steps Down

German-U.S. automaker DaimlerChrysler tightened its grip on scandal-hit Mitsubishi Motors today by dispatching a key troubleshooter to Japan in a prelude to a potential takeover in three years time.

Taking advantage of Mitsubishi’s woes over a consumer complaint cover-up, the world’s number three carmaker agreed to send senior executives to its Japanese partner with the task of overhauling its operations.

They will be headed by Rolf Eckrodt, the tough boss of DaimlerChrysler’s unit Adtranz, who will become chief operating officer at Mitsubishi Motors (MMC), the world’s tenth biggest car firm.

Their alliance focuses on small cars, but industry sources indicated DaimlerChrysler’s interest in MMC’s commercial vehicle business could put it on a collision course with Volvo, which is due to take a 20 percent stake in Mitsubishi’s truck unit.

Stake Stays the Same Contrary to some expectations, DaimlerChrysler did not increase its 34 percent stake in Mitsubishi Motors, but it renenegotiated its price down to $1.9 billion from $2.1 billion.

Unlike German rival BMW AG, which lost billions of dollars and put its independence at risk by taking over Britain’s ailing Rover Cars, DaimlerChrysler made clear a takeover was an option only when Mitsubishi was back on track.

“DaimlerChrysler AG is entitled to increase its stake in Mitsubishi Motors Corporation after a period of three years without limitation,” it said in a statement.

DaimlerChrysler also avoided consolidating its troubled partner so that its balance sheet is not burdened with Mitsubishi’s 1.47 trillion yen ($13.95 billion) debt.

Analysts welcomed the move, noting that the German-U.S. group managed to strengthen its foothold in Asia at a relatively low risk while gaining the freedom to launch a complete takeover.

“For DaimlerChrysler, this gives a completely new complexion to the situation. The price reduction was not a big issue,” Schroder Salomon Smith Barney analyst John Lawson said.

“What was missing before was a way to move forward and hopefully, this [the option to take full control] will give them that,” he said.

Mitsubishi Faces Charges The deal was announced as Japanese authorities said they would press criminal charges against Mitsubishi, which admitted last month it had systematically covered up customer complaints for over 20 years.

In response, Mitsubishi’s President and Chief Executive Katsuhiko Kawasoe said today he would resign, taking responsibility for the embarrassing affair.

He will stay on the board, to be expanded to 11 members, while Takashi Sonobe, head of the carmaker’s international operations, will become chief executive.

Sonobe brushed aside the idea that the arrival of Eckrodt could be compared to the appointment of Renault manager Carlos Ghosn at Japanese rival Nissan Motor, where he launched a drastic three-year restructuring program.

“I will be responsible for strategy, product development and finance over the long term. The Chief Operating Officer will be in charge of day-to-day operations and will report to the CEO,” he said in Tokyo.

“Staying independent is important and we managed to do that by keeping DaimlerChrysler’s stake at 34 percent,” he added.

DaimlerChrysler Calls the Shots But DaimlerChrysler made clear it expects Mitsubishi to allow the foreign contingent to play a key part in the company’s overhaul. It will become its biggest shareholder, followed by Mitsubishi group companies with a 33 percent stake.

“After constructive and fruitful discussions Mitsubishi Motors Corporation and DaimlerChrysler AG mutually agreed that DaimlerChrysler AG will increase its influence in Mitsubishi Motors Corporation,” DaimlerChrysler said.

“Changes have been agreed to the organization and management of Mitsubishi Motors that will ensure the recovery of the company’s reputation,” it said.

Analysts say Sonobe also has a track-record of tough decision-making and turnaround successes during his time at Mitsubishi’s North American operations.

Erik Burgold, auto sector analyst at BHF-Bank in Frankfurt, said it was not yet clear how much operational control DaimlerChrysler will be able to wrest from Mitsubishi Motors Corp’s parent firm.

“In my view, the problem still exists that Mitsubishi Motors is integrated into the supplier structure of Mitsubishi Heavy Industries and the question is how far they can break up the supplier structure,” he said.

Truck Tussle? Another question puzzling analysts is the future of Mitsubishi’s commercial vehicle operation in which rival Volvo has a five percent stake.

DaimlerChrysler, the world’s number one in heavy trucks, said it would honor Mitsubishi’s agreement with Volvo — which wants to boost its stake in the trucks unit above 20 percent it is due to take next year.

But industry sources said Daimler would oppose any such move, setting the scene for a tussle with the Swedes over the attractive business. Daimler’s 34 percent stake allows them to block any decision regarding capital increases.

Volvo said changes in an alliance between DaimlerChrysler and Mitsubishi would not weaken its own deal with MMC but admitted it made its own tie with the Japanese company more difficult.

“Our position has not weakened because of this [new deal]. They are adding an operative boss for the car division, which confirms what MMC has said and that is that the car and truck divisions must be separate,” AB Volvo spokesman Mats Edenborg told Reuters.

Eleven months ago Volvo, the world’s second biggest truck maker, and Mitsubishi took small stakes in each other and agreed that Volvo would acquire one-fifth of MMC’s prized truck and bus unit when it is sold next July.