Beavis quits: Mitsubishi battles for its survival

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Even as Mitsubishi faces up to the Herculean task of rebuilding its brand, renewing public trust and attracting new investors, it has lost its U.S. marketing leader, Ian Beavis, seen by many as one of its brightest turnaround agents.

Along with Mitsubishi North America CEO Finbarr O'Neill-brought in last year from Hyundai-Mr. Beavis was charged with the unenviable task of turning around the troubled automaker.

While he had started the work of weaning the brand off its crippling diet of incentives, recent results have led experts to question the viability of the company.

"The question is will Mitsubishi slowly go out of business or just explode," said one industry insider. Experts question whether Mitsubishi Motors Corp. in Japan has the capital for new-product development and marketing.

"Everyone needs to understand we are still in our first year of a three-year turnaround plan" that started in April, said Mr. Beavis, prior to his resignation, Nov. 24, as senior VP-marketing, product development and public relations.

The turnaround team in Cypress, Calif., fixed a lot of internal issues invisible to outsiders, said Mr. Beavis, who joined the carmaker just a year ago following spells at ad agency Foote, Cone & Belding and Toyota Motor Corp. He and Mr. O'Neill eliminated risky financial offers, streamlined operations, restructured, cut staff, ended fleet sales and early this year cleared out 2003 inventory. About a month ago, they started Mitsubishi's first certified-used vehicle program to help boost resale values that were hurt by five years of virtual giveaways.

Still, the automaker reported earlier this month its North American sales through October plummeted nearly 36% to 142,157 units vs. a year ago. Although the marketer cut its average incentive per vehicle from $3,282 in August 2003 to $1,752 in July 2004, incentives have crept up every month since to $2,291 in October, according to auto information site Edmunds.com.

triple zero

Interviewed before his departure, Mr. Beavis said the sales drop was partly due to Mitsubishi's elimination of sales to rental-car companies and fleet buyers. He projected an uptick when Mitsubishi launches the redone Eclipse next June and the all-new Raider pickup in 2005.

Mitsubishi began offering rich incentives in fall 1998, which grew to so-called triple-zero deals with no down payments, no financing costs and no payments for a year. Although the top brass in 2002 bragged of having the industry's youngest buyers, owners returned their vehicles in droves when payments came due or the cars were repossessed.

Annual U.S. sales jumped to nearly 350,000 units in 2002 and the former executives predicted sales growing aggressively in North America to 600,000 units by 2007. But Mitsubishi sold only 256,810 vehicles here in 2003, a 25% drop from the prior year.

Earlier this month, Mitsubishi cut its projections by 29% for North American vehicle sales in the fiscal year ending next March 31 to 185,000 units from 264,408 in the previous fiscal year, according to Automotive News. The parent reported that its net loss expanded to $1.32 billion for the six months ended Sept. 30 from $722 million.

east going south

Mitsubishi's vehicle sales are also plummeting in Japan, where its executives have been arrested for allegedly hiding defects to prevent vehicle recalls for at least 25 years. None of the cars involved are sold in the U.S. Germany's DaimlerChrysler, which bought a 37% stake in Mitsubishi four years ago, refused to give the company more financial aid this past spring. The automaker's new chief in Japan managed to secure a $4 billion-plus bailout from sibling companies and J.P. Morgan Chase. But Mitsubishi is burning through that cash.

Mitsubishi said it is seeking a successor to Mr. Beavis, who recently hired Bob Martin from Hyundai, as a director-brand marketing. But it is not yet clear whether that will mean another change in marketing direction.

Mr. Beavis, not only influenced the company's approach to incentives, but also changed its ad approach. The campaign he inherited, from Deutsch, Los Angeles, was heavier on music than message and targeted too narrowly at younger people to the exclusion of older consumers, he said, adding that current buyers are in their late 30s and early 40s. The old "all-emotional" ads were "a waste of money" with no rational underpinning, he said.

Deutsch's current campaign, which broke last month, touts Mitsubishi's "Best-Backed Cars in the World" theme. The line goes beyond the brand's 4-month-old, five-year/60,000-mile warranty and 10-year powertrain guarantee and makes a statement about the corporation. The ads suggest longevity, product quality, hands-on service and virtually worry-free maintenance, since Mitsubishi provides free oil changes and tire rotations for up to three years or 45,000 miles.

In his former job as president-CEO of Hyundai Motor America, Mr. O'Neill introduced a warranty in fall 1998 that many credit with helping to bring the South Korean importer back from near death.

A second auto expert, who asked not to be named, said Hyundai was in worse shape than Mitsubishi is now. "It's premature to give up on Mitsubishi."

But Todd Turner, president of consultancy CarConcepts, isn't as optimistic: "I just don't see this brand coming out of the business it was in, which was the deal business."

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