Mitsubishi hopes new Lancer gets it back on track

Times Staff Writer

Mitsubishi Motors Corp., once a shooting star among the smaller Japanese automakers fighting for space in the U.S. market, needs a hit. Badly.

The company, beset by problems here and at home, has seen its U.S. sales plummet 64% from their high in 2002.

Renowned at one time for cutting-edge design and technology, Mitsubishi was among the first automakers to use four-wheel steering and to offer a convertible sports car with a retractable hard top.

It pioneered the direct-injection gasoline engine, for more power with increased fuel economy; and active "yaw," or body-roll, controls that keep a vehicle from pitching uncomfortably from side to side on curves.

These days the company is better known for cheap loans and woeful resale values.

"It's a shame, because they've always made good cars," said industry analyst George Peterson, president of market research firm AutoPacific Inc. in Tustin. "But they lost their image."

Hiroshi Harunari, president and chief executive of Cypress-based Mitsubishi Motors North America, believes that is about to begin changing.

The company is preparing to introduce a new version of its Lancer compact, a car that it hopes will appeal not only to mature buyers seeking affordable, fuel-efficient transportation but also to younger enthusiasts familiar with the Lancer's storied roots in World Rally Cup racing.

Mitsubishi's dealers certainly hope so.

"If this car doesn't succeed, you'll have to question the company's ability to succeed in the U.S.," said Tom Coxton, owner of Huntington Beach Mitsubishi.

His stand-alone franchise "is barely hanging on," Coxton said. Sales are averaging 20 cars and trucks a month this year, about half his 2005 volume.

Nationally, Mitsubishi dealers are selling 19 new vehicles a month on average, compared with 32 a month through October for rival Mazda Motors Corp. dealers, who target the same performance-oriented, youth market that has been Mitsubishi's core.

The new Lancer -- lower, wider and more powerful than the current model, which sells for $14,600 to $20,000 -- is scheduled to be unveiled in January at the North American International Auto Show in Detroit.

It will go on sale as a 2008 model in late March or early April, Harunari said.

He sees the new car as crucial to Mitsubishi's U.S. recovery efforts and to its global effort to repolish an image tarnished in recent years by huge losses, quality-control scandals in Japan and a disastrous cheap-loan program in the U.S.

The latter brought a batch of buyers with poor credit records who eventually cost the company a few billion dollars in loan defaults.

Mitsubishi won't discuss particulars of the new Lancer or the marketing plan behind it, but analysts and dealers say U.S. sales will have to reach or exceed 50,000 a year for the car to be considered a success.

The automaker, strapped for cash for several years, is going to have to loosen the purse strings to market the car if it hopes to rebuild its presence in the U.S. market, said Eric Noble, president of CarLab, an automotive product development and consulting firm in Orange.

Bryan Arnett, head of Mitsubishi's compact vehicle programs in North America, would say only that the company "will spend sufficient dollars" to sell its Lancer message.

The company's future depends on that, Coxton said.

"Product isn't our problem," the dealer said of slumping sales. "We don't do well because we don't have the money to tell people about our cars and trucks."

The current-generation Lancer, hurt in part by a lack of advertising, is selling at a pace of only 2,000 cars a month, half of what the new model will have to do.

In 2002, Mitsubishi's peak sales year in the United States, dealers sold 76,000 Lancers, or slightly more than 6,000 a month.

Total U.S. volume for all seven Mitsubishi models this year is barely more than that, with 99,392 cars and trucks sold through October, a 5.7% decline from the same period last year.

The new Lancer, then, "is so important because there's not much happening with the rest of the Mitsubishi lineup," consultant Noble said. "They need the Lancer to gain volume for the next few years."

To keep enthusiasm high after the Lancer sedan goes on sale in the spring, Mitsubishi plans several variations, possibly including a coupe or a five-door hatchback, as well as specially equipped style and performance versions.

All will be leading up to the debut late next year or early in 2008 of the high-performance Evo 10, which could come to the U.S. with an engine rated at 300 to 350 horsepower.

"They're going to have to have a number of special editions to keep up the interest until the Evo gets here," Noble said.

The Evos -- the current model is the Evo 9, for ninth generation -- are based on Mitsubishi's world-champion Evolution rally cars.

The Evo 10 will be built off the new Lancer platform and share more common parts with it than in the past, Harunari said -- an indication that Mitsubishi developed a platform for the mainstream model that will provide for better ride and handling than the present version.

Although suspensions and powertrains differ, the new compact platform was co-developed with DaimlerChrysler and is being used for the new Dodge Caliber compact as well as the Mitsubishi Outlook, a crossover, or car-based, sport utility vehicle that went on sale this month.

The Evo "is Mitsubishi's halo car," Noble said, meaning that it's the one capable of delivering shoppers to the company's dealerships.

"There's already a lot of anticipation about the new Evo, and that should help drive a lot of customers into dealers' showrooms to look at the Lancer," he said.

Although the company won't talk publicly about the new car before it bows in Detroit, Mitsubishi has shown it to dealers and to some automotive writers and analysts.

Early reports are enthusiastic.

It "may be the game changer" for Mitsubishi, analyst Peterson said after seeing and driving the car during a recent preview program in Santa Barbara.

"From standpoints of styling and ambience, it is probably the most head-turning of all the new small cars we've seen out there recently," he said. "It's going to put them in a strong position to fight in the increasingly crowded small-car market."

Arnett, Mitsubishi's compact-car chief, said the company used the hot-selling Mazda3 compact as one of its benchmarks for design and equipment.

The Mazda comes with two engine options, manual and automatic transmissions, optional high-end stereo and navigation systems, multiple air bags, a European-tuned suspension and a long list of standard features.

The new Lancer will be introduced with a 2-liter, four-cylinder engine with an estimated 150 horsepower.

Peterson said testing one version in Santa Barbara -- equipped with an automatic transmission that used steering-wheel- mounted paddle shifters to change gears -- "was like driving a video game."

He said Mitsubishi "probably overachieved its benchmark" and would hit the market with a car that "is more substantial than the Mazda3, and that's not to take anything away from the Mazda," which is selling at a rate of 8,000 a month this year.

john.odell@latimes.com

For The Record Los Angeles Times Tuesday December 05, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 45 words Type of Material: Correction Mitsubishi's future: An article in Sunday's Business section about the importance of the redesigned 2008 Lancer compact car to Mitsubishi Motors Corp.'s future in the U.S. market referred to the company's small crossover sport utility vehicle as the Outlook. The SUV is called the Outlander.
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