Mitsubishi Buys Chrysler’s Stake in U.S. Venture

Mitsubishi Motors Corp. finally agreed to buy Chrysler Corp.’s half-interest in their joint U.S. car making venture for $100 million, ending months of prickly negotiations against a heavily political backdrop.

The buyout, triggered by Chrysler’s desperate need for cash, also enables Mitsubishi to portray itself as helping out a firm known for Japan-bashing. And it gets Chrysler out of a politically awkward partnership.

The companies said Tuesday that they will continue their other commercial arrangements. That includes Chrysler’s purchase of some of the cars built in Illinois and its importation and sale of Mitsubishi-built cars from Japan.

However, some analysts also expect Chrysler to go ahead with a proposal to sell back its remaining 11% stake in Mitsubishi Motors.

The end of the brief partnership in Diamond-Star Motors, which began building cars in a futuristic assembly plant in Normal, Ill., in 1988, is the latest twist in a rocky 20-year relationship between Mitsubishi and Chrysler.

Until 1980, Chrysler dealers had the exclusive right to sell Mitsubishi’s cars in the United States under such names as the Dodge Colt and Plymouth Champ. But Chrysler’s money troubles in the 1980s gave Mitsubishi leverage to gain greater control in their dealings.

It became a significant importer with its own Mitsubishi dealerships and finance arm, and the Diamond-Star venture gave the firm a U.S. manufacturing foothold that represented its only way of expanding here.

It also taught Chrysler executives some Japanese manufacturing and product-development techniques that they are now applying on upcoming models and in other factories.

Diamond-Star built 148,000 cars last year--84,000 for Chrysler and 64,000 for Mitsubishi. The plant makes the Mitsubishi Eclipse and Mirage, Plymouth Laser and Eagle Talon and Summit.

But as the auto market has slumped and the Japanese yen climbed sharply against the dollar, Diamond-Star has apparently remained a money-losing proposition for both companies.

Meanwhile, Chrysler Chairman Lee A. Iacocca’s harsh criticism of Japanese trade practices and his call for auto trade barriers have made the firm’s partnership with Mitsubishi a political embarrassment.

“Politically, there’s an advantage to distancing themselves,” said Richard Recchia, executive vice president of Mitsubishi Motors Sales of America in Cypress. “Iacocca hasn’t exactly been extending an olive branch across the Pacific.”

For its part, Mitsubishi has described itself as a reluctant buyer in the negotiations and portrayed the pending agreements as an act of aid to struggling Chrysler despite the anti-Japanese stance of its chairman. Japanese newspaper reports have said Mitsubishi would “prop up” Chrysler by agreeing to buy the rest of Diamond-Star.

That infuriates Iacocca, who complains that Mitsubishi has rebuffed Chrysler on several other fronts.

“They’ve got good PR guys. We’re talking peanuts here,” Iacocca said in a recent Times interview. “They’re suggesting they’re some good godfather. Whaddya mean, bailout? If they really wanted to help us, there were a hell of a lot of areas they could have helped us in.”

The $100 million will help beleaguered Chrysler, but it is a relatively small sum compared to the nearly $400 million the company recently raised in a stock offering and the $430 million that Chrysler’s 11% stake in Mitsubishi would bring. And analysts say there were other dimensions to the partnership.

“Mitsubishi loses a partner who’s been absorbing losses to help them establish a manufacturing presence in the United States,” said David Garrity of Nomura Research Institute in New York. “It hasn’t been a bargain for Chrysler.”