NEW YORK (TheStreet) Mitsubishi Motors (MMTOF), a smaller Japanese automaker trying to regain momentum as a global player, said it will halt vehicle assembly at its only U.S. plant in Normal, Ill., by year's end and try to sell the factory.
In June, Mitsubishi unveiled a face-lifted Outlander compact utility vehicle for sale in the U.S. to compete against the Ford (F - Get Report) Escape, Toyota (TM - Get Report) RAV4 and similar models. Using expressive exterior design and an eye-catching advertising campaign, Mitsubishi aims to attract individualistic buyers who wish to avoid owning the same crossovers as their neighbors do.
But the company's executives acknowledged that the brand has fallen toward obscurity with roughly half of car buyers unaware that Mitsubishi still makes cars. And with lower gas prices, models such as the subcompact Mirage, with a combined fuel efficiency rating of 41 miles per gallon, are less appealing to many drivers than larger, less fuel-efficient sport-utility vehicles.
In the past year, Mitsubishi Motors shares have fallen 11.5%, while the Nikkei index of 225 stocks has gained 33%.
In the early 2000s, the Normal plant reached a peak production of more than 200,000 cars a year. Last year, output of Outlander SUVs totaled 69,178, Mitsubishi said. The factory has benefited from state and local financial incentives.
The factory opened in the mid-1980s, operating first as a joint venture with Chrysler and then on its own. Like other Japanese automakers, Mitsubishi has hoped to defuse rising trade tensions with the U.S. by manufacturing locally and employing American workers. The plant has been an oddity as the only workforce employed by a Japanese automaker to be represented by the United Auto Workers union.
Mitsubishi's sales in the U.S. were trending higher in the early part of the century before the company stumbled into serious financial and reputational difficulties. In Japan, the company admitted it covered up defects in its cars.
In the U.S., the automaker pursued an aggressive marketing campaign called "0-0-0," which invited customers to buy cars on credit with no money down, no interest and delayed monthly payments. Thousands of buyers, many with poor credit records, eventually defaulted on their loans, leading to a write-down in 2003 of nearly half a billion dollars.
In June, Mitsubishi said it was recalling 460,000 vehiclesin the U.S. because sun visors could be pushed into the faces of occupants when airbags were deployed causing injuries. Five people were hurt in such mishaps.
The plant, employing about 1,300 workers, is the sixth-largest employer in the region surrounding the cities of Bloomington and Normal, according to the area's economic development council.
Selling the plant to an automotive manufacturer won't be easy. Though demand for vehicles has been strong, automakers aiming to increase production have tended to avoid the UAW by opening new plants in the deep South, where union antipathy is strong.
Other car makers are flocking to Mexico to take advantage of the country's trade agreements and wages that are lower than those in the U.S.