Mitsubishi Turns to Auto Veteran to Put Brakes on Slide
Rich Gilligan, 61, walked into a tough job when he took over as president of Mitsubishi Motors Corp.’s North American operations in January.
Mitsubishi is the only Japanese automaker that is unprofitable. Its management in Tokyo has been rocked by a scandal over efforts to conceal product flaws on vehicles sold in Japan. DaimlerChrysler, which had been a major investor, recently told Mitsubishi not to count on any additional financial help. What’s more, Mitsubishi’s U.S. market share has been slipping and there have been rumors, repeatedly denied, that a strategic withdrawal from the U.S. market is possible.
Enter Gilligan, a 30-year veteran at Ford Motor Co., who had run Mitsubishi’s U.S. manufacturing plant in Normal, Ill., for seven years. He now oversees Mitsubishi’s entire North American operation including sales, marketing, distribution and dealer development after his predecessor, Finbarr O’Neill, left to head an automotive software company.
In a recent interview at Mitsubishi Motors North America Inc. headquarters in Cypress, Gilligan talked about the company’s future.
Question: Mitsubishi’s U.S. sales plummeted 53% from 2002 to 2004, from selling 345,111 cars and SUVs to just 161,609 two years later. And in the first two months of this year sales are down by another 45%. When does the slide stop?
Answer: We’ve got great reliability ratings in the U.S. [the defects cover-up involved only Japanese market models], we’ve got new products coming, and we’ve resolved the problems with our credit company and our marketing message.
Q: What about the sales slide?
A: A lot of those sales in the big years were from sales to rental and business fleets, and were nearly 100,000 units at one point. But those are very low-profit sales and when you have too much fleet [business] it ultimately hurts. The cars in rental and corporate fleets come back into the used-car market and when you have so many they hurt new-car sales. By last year, we had reduced our year-over-year fleet sales by 44%, and we plan to reduce that by another 28% in 2005. We also tightened up credit requirements [to fix a soaring loan default problem] and as a result, year-over-year sales continue to look worse. But we have turned the corner. I really believe that. Our February sales were up about 72% [from January].
Q: So is the pain and suffering really over?
A: Well, there are no more staff reductions planned, we’ve hired a new advertising agency to re-focus our message, and we’ve got all that new product coming in the next 12 months.
Q: Such as?
A: We’ve got the new Eclipse [sports coupe] in June, the Evo [performance-oriented compact sedan] in August, the brand new Raider pickup truck in October and the next generation Eclipse spyder [convertible] comes next April. We just finished three days of meetings with our dealer board, and they say they are very happy with the new products ... that if we get our new message across and can drive traffic to the dealerships, they can do the rest.
Q: Some critics say you still don’t have enough product. Of the four new models, only one, the pickup, is an addition to the line. The others are just new versions of existing models. And the Raider is just a Mitsubishi body and interior on a Dodge Dakota.
A: Yes, but it has Mitsubishi DNA. The most powerful engine in the [mid-size pickup] class, and an interior that really differentiates. There are 37 brands and 276 nameplates sold in the U.S. If you don’t have fresh, exciting product coming every five to six years, the game is over.
Q: Anything else on the way that’s special?
A: We’ve got a few things planned. Special editions and trim packages to extend and freshen our lines. And there’s a new Evo and a new Outlander [small SUV] coming in the 2007 model year.
Q: You said Mitsubishi’s dealers are excited. But haven’t you been losing dealers lately?
A: We’ve gone from 650 to 582 dealers in the U.S. in the past two years. But we have replaced some who have left key markets, and in some areas we needed fewer. We also have new dealers joining us and some who are expanding. One of our dealers in Houston is building his second Mitsubishi store. So there are still people entering the trenches with us.
Q: Still, you had a 2% share of the U.S. market at the end of 2002, now you are down to less than 1%. What are your goals here?
A: We’d need to have between 1% and 2% market share to have turned the corner. But we believe we will be profitable again in North America in our 2006 fiscal year [which ends in March 2007]. We’ll get a sales pop from the new product.
Q: And the future?
A: We’ve got work to do, but we are here to stay.
