Futaki plans Mitsubishi fix

Executive is charged with making automaker's U.S. operations more cost-efficient

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July 21, 2006|By JIM MATEJA | JIM MATEJA,CHICAGO TRIBUNE

NORMAL, Ill. -- Shiro Futaki is no stranger to the Mitsubishi plant here.

He was the one who set it up in 1985, when it began producing Mitsubishi and Chrysler vehicles in a joint venture known as Diamond Star Motors.

What a difference 21 years makes. Chrysler is gone, along with the second shift at the plant and 100,000 units of annual output, as well as the 1,000 workers who produced them.

But Futaki is back, charged with making manufacturing more cost-effective in the latest bid to fix what ails the automaker in the United States.

Some would say turning around an operation that has been knee-deep in red ink for three years is daunting; others would say it's impossible.

"You can't cost-cut your way to prosperity," said Jim Hossack, a vice president of AutoPacific, an industry research and consulting firm. "The key is higher volume, and that takes higher sales."

Mitsubishi sales in the first five months this year are off 12 percent, to 48,357 units from 55,132 a year earlier.

Futaki, 57, is unfazed if not single-minded. "It's difficult, but North American business is very important. I have a clear target; the manufacturing division has to be profitable by 2007," he said.

Mitsubishi last made an operating profit in North America in the fiscal year that ended March 31, 2003, when its balance sheet showed $293.7 million in black ink.

Since then, production has fallen to 90,000 from 200,000 units in 2002, the plant's high-water mark. Profits have been hard hit by the limited line of cars, discount financing that backfired when credit-challenged customers couldn't make payments and fleet sales couldn't offset the decline.

And "I have to be cost-competitive with Toyota, Honda and Nissan in one plant on one shift," he says of competitors running multiple plants and shifts, not to mention the volume discounts they reap for purchasing parts for 500,000 cars rather than the 90,000 Mitsubishi builds.

His primary focus is on value engineering, and a section of the plant has been fenced off for the teardown of cars. It is an area that would be humming if the plant was running on two shifts; it houses empty parts containers.

Automakers take competitors' cars apart piece by piece to learn what the rivals did that they didn't. Futaki is using the area to tear down his own cars to learn what he can do better - and cheaper.

Each piece of a Galant is inventoried. "We're looking to bring cost down by looking at each part. Can one part do the work of two?"

Each part also is weighed. "Maybe we can reduce the thickness to save on material," he said.

Each part carries its current price tag and a savings estimate, even if only 10 cents a clip, for example.

At most plants 60 vehicles are produced each hour. The rate is about 50 here.

"I expect a volume increase, but sales are Mr. Harunari's role. Mine is to bring down manufacturing costs," said Futaki, corporate general manager of production engineering for Mitsubishi in Japan before this assignment as president and chief executive officer of manufacturing for Mitsubishi North America.

Futaki is talking about Hiroshi Harunari, who also was summoned from Japan this year to be co-president and co-CEO of Mitsubishi North America with Rich Gilligan, who was elevated to that post in 2005 from head of the Normal operations. Though they are co-CEOs, Gilligan reports to Harunari at decision time.

"It's good that Japanese executives were sent here," said Jerry Berwanger, chief operating officer of Mitsubishi North America. "It shows Mitsubishi has conviction in its U.S. investment."

Berwanger must implement Futaki's decisions.

Analysts see the move as a positive, too. It stresses the importance of North America to Mitsubishi, while assuring clear communication between here and in Japan.

Futaki is counting on export business to boost production starting this month, when it begins shipping the first of 10,000 Galants annually to Russia and Ukraine.

That would bring plant output to about 101,000 cars. It needs at least 160,000 for a second shift, Berwanger said. Gilligan has pegged that at 200,000. Chrysler produces roughly 100,000 vehicles per shift. It added a second shift in Belvidere to boost output to 200,000 and will add a third next month to go to 300,000.

Critics insist Mitsubishi could boost output if it produced more than four models in Normal. "With more models, it also means added cost in tooling," Futaki said. "My job is to make the plant profitable with the production I have."

Jim Mateja writes for the Chicago Tribune.

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