Industry Report: DaimlerChrysler to No Longer Fund Debt-Laden Mitsubishi Motors

MMC Stock Plunges while DCX Shares Rise at News of Potential Separation

Whether DaimlerChrysler's Thursday announcement that it may be severing ties with troubled Japanese automaker Mitsubishi Motors is a ploy to motivate the other

DaimlerChrysler's announcement that it will be severing ties with troubled automaker Mitsubishi Motors will surely be devastating for the Japanese company. (Photo: Alexandra Straub, Canadian Auto Press)

shareholders involved to cooperate in its restructuring plans, or a realization that its core brands, Mercedes-Benz and Chrysler, need and deserve more attention and money, can't be said for sure. Either way, it will be devastating news to Mitsubishi.

DaimlerChrysler bought a controlling 37 percent stake in Mitsubishi Motors over three years ago in an effort to increase its presence in Asia and resultantly become a true global automaker, but the scandal ridden Tokyo-based manufacturer was the only Japanese brand not to make a profit last year in its domestic market, and furthermore suffered tremendous losses due to increased incentives

Bluff or not, according to a DaimlerChrysler spokesman, "This clearly means separation." (Photo: Trevor Hofmann, Canadian Auto Press)

and therefore lower profits in the competitive North American market, combined with a poorly managed credit arm.

Why DaimlerChrysler's seemingly sudden change of heart, after speculation was rampant that the Stuttgart-based automaker was to increase its stake to over 50 percent and work more directly with Mitsubishi in future product architecture and component sharing? DCX stated it pulled out of the "cooperative" rescue plan because it could not agree on an acceptable deal with Mitsubishi Motors' other shareholders. DCX added that it would not provide any further financial support to Mitsubishi as well.

Again, is it a bluff to cause all parties to see the DCX way? If it is, it's a highly convincing poker play. According to a DaimlerChrysler spokesman, "This clearly means separation."