Chrysler, Mitsubishi Slate Joint Venture to Build Car Plant in U.S.

Chrysler and Mitsubishi Motors said here Monday that they will establish a joint venture to build a $500-million factory in the United States that will employ 2,500 workers.

The factory is expected to produce 180,000 Mitsubishi-designed subcompact cars a year beginning in the latter half of 1988 and will be located in the Midwest, the announcement said.

It will be the fifth enterprise to involve a Japanese auto firm in American manufacturing and will bring the total capacity of U.S. plants producing Japanese-designed cars to at least 1.07 million cars in 1988.

The announcement came after Chrysler Chairman Lee A. Iacocca signed a memorandum of understanding with Toyoo Tate, president of Mitsubishi Motors. A formal agreement will be signed when the two companies work out details, it said.

Chrysler also will increase its stake in Mitsubishi Motors from the 15% it acquired in 1971 to 20% immediately and to 24% next year, the announcement added.

Tate told a news conference that the two firms would jointly select a plant site somewhere in the Midwest “within several months.”

Many More Jobs

A Chrysler announcement said the new plant will create at least 8,800 more jobs in supplier industries in addition to the 2,500 workers that the plant itself will employ at capacity. Tate said about half of the components of a new Mitsubishi-designed small car with an engine displacement of 1,600 cubic centimeters will be procured in the United States.

Although both firms will hold equal representation on the board of the new joint venture and make policy decisions together, Mitsubishi will be given control of day-to-day management, as well as the design and construction of the plant.

The two firms will divide the production equally, each of them taking 90,000 cars for distribution through their separate American dealerships, Tate said.

When the plant goes into full operation, the capital of the new joint venture is expected to reach $150 million, he added.

With Chrysler increasing its share of Mitsubishi Motors stock in two stages to 24%, Mitsubishi Heavy Industries, the principal stockholder of the Japanese auto firm, will sell off some of its shares to Chrysler, other Mitsubishi firms and, eventually, to the public, Tate said. After the U.S. factory starts operating, by or around the fall of 1988, Mitsubishi Motors will become a public corporation with its shares traded on the Tokyo Stock Exchange, he added.

Mitsubishi Heavy Industries and Chrysler, however, will remain the principal stockholders of the auto firm in Japan, he said.

May Seek Investments

In the new joint venture in the United States, Mitsubishi Motors, if it chooses, may seek investments from other Mitsubishi group companies, such as the giant trading firm, Mitsubishi Corp., or Mitsubishi Bank, to share its 50% ownership, the announcement said.

Tate told reporters that Chrysler will purchase more equity in his firm in Japan “to strengthen its cooperative relationship with Mitsubishi Motors.”

The auto executive said that Mitsubishi decided to invest in manufacturing in the United States in the belief that “complete freedom of exporting to the American market will not occur in the foreseeable future.”

“The United States is a very important market to which we must pay careful attention,” he said.

Although criticized in the United States as a meaningless restriction, new quotas that Japan is imposing on car exports to the United States in fiscal 1985 will limit Mitsubishi’s ability to supply Chrysler with Japanese-built subcompacts to 140,490 units, according to an Asahi newspaper report Sunday. Chrysler, which procured 87,600 cars from Mitsubishi in fiscal 1984, has announced a desire to buy as many as 287,600 cars from its Japanese affiliate.

In fiscal 1984, the last of four years of a program of “voluntary restraints” that Japan carried out in consultation with the United States, Mitsubishi was able to export only 35,010 cars to its own dealerships in the United States. Under quotas that the Ministry of International Trade and Industry is planning for fiscal 1985, the firm reportedly is to be limited to 45,520 cars, an increase of 10,510, for its U.S. showrooms.

At present, Honda is increasing the capacity of its Ohio plant from 150,000 cars a year to 300,000, while Nissan has begun production of 100,000 cars a year at its Tennessee plant.

Toyota and General Motors, in a joint venture, have started production at Fremont, Calif., of 250,000 cars a year, and Mazda is constructing a plant in Michigan that will produce 240,000 cars a year beginning in 1987.

With production of the new Chrysler-Mitsubishi plant added in 1988, the capacity of factories to produce Japanese-designed cars in the United States will reach at least 1,070,000.

Thus, even if exports were to remain at the 2.3-million level of the fiscal 1985 quota, Japanese firms will have the future potential of selling or sharing in the sale of 3.37 million cars in the United States. In fiscal 1980 (April, 1980-March, 1981), the last year before Japan began imposing export quotas at the request of the Reagan Administration, Japan exported 1.8 million passenger cars to the United States.