Japan's Mitsubishi Motors Corp. said Tuesday it will close down a struggling plant in Australia with 930 layoffs as it expands its lower-cost operations in Thailand.
The company blamed a waning appetite for large cars like the “380” sedan produced by the assembly plant in the southern city of Adelaide. The plant makes only about 10,000 cars per year despite having a capacity for 30,000.
The factory employs 1,164 people and a total of 930 will lose their jobs, the company said.
Mitsubishi Motors promised “very favourable separation packages” to employees who are laid-off and to work with the Australian government to provide retraining and other support.
“It is an inescapable fact that there is now a deepening trend away from large cars,” Mitsubishi Motors Australia chief executive Rob McEniry said in a statement.
“We see no path for a return to viable production levels of the 380 sedan or a commercial case for developing any replacement production,” he said.
McEniry broke the news of the closure to workers at a meeting in the plant, which Mitsubishi started in 1980 after buying it from Chrysler.
“It was very emotional,” Australian Manufacturing Workers Union state secretary John Camillo told reporters.
Three carmakers now produce vehicles in Australia following Mitsubishi's decision: Holden, a subsidiary of General Motors, Toyota Motor Corp. and the Ford Motor Co.
Mitsubishi will pursue growth in the Australian market by importing and introducing new models including the Triton, Outlander and Lancer.
Mitsubishi's Adelaide operations have become increasingly unprofitable in part due to the sharp rise in the Australian dollar, which makes it cheaper for Australians to buy imports.
The company has also lost an advantage due to Australia's growing trade deals with Asia.
Australia in 2005 entered a free-trade pact with Thailand, enabling rival Japanese automakers using the Southeast Asian nation as a manufacturing hub to export to Australia without tariffs.
“We have been reinforcing the production capacity of our Thai plant from the end of last year and intend to move to full production,” Mitsubishi's chief financial officer Hiizu Ichikawa told a press conference in Japan.
The firm also has plants in the United States and the Netherlands in addition to its domestic operations.
After closing the Australian plant, “we are looking to utilise the three factories in the most efficient way possible,” Ichikawa added.
Mitsubishi Motors, which is recovering from a series of scandals over the cover up of defects, has the most troubled finances of Japan's major automakers, which have been cashing in on demand overseas.
The company required a major bailout from the Japanese government in 2004 to recover. But it kept the Adelaide factory even during restructuring, closing only an engine plant after intense lobbying by the Australian government.
Mitsubishi Motors' announcement came as the automaker reported a return to the black in the nine months to December due to higher sales in Europe and Asia along with a weaker yen.
It posted net profit of 21.67 billion yen (202 million dollars) for the nine-month period, compared with a year-earlier loss of 11.76 billion yen.
“Growth is picking up at a pace beyond our expectations and brisk sales in Asia and Europe offset struggling sales in Japan,” said Ichikawa to reporters.
However, the company revised down its forecast for sales in North America due to the subprime mortgage problems and faltering US economic growth.
