TOKYO -- Mitsubishi Motors has started making the final arrangements for the closure of a car plant of subsidiary Pajero Manufacturing within three years, sources familiar with the matter said on Wednesday, Nikkei has learned.
The Pajero Manufacturing plant, which is based in the Gifu Prefecture town of Sakahogi, has produced cars such as the Pajero sports utility vehicle, but its output rate has been mired in the doldrums due to slumping sales.
Mitsubishi Motors will also cease production of Pajero cars, which it has so far continued for export, around 2021. These plans will be included in the automaker's new mid-term management plan to be announced on July 27, the sources said.
In Japan, Toyota Motor has also decided to close a plant of group company Higashi-Fuji in the Shizuoka Prefecture city of Susono at the end of 2020, while Honda Motor will shut its Sayama plant in the Saitama Prefecture city of Sayama by fiscal 2021.
Japanese carmakers are moving to cut back on excessive production capacity as the domestic market for new autos is shrinking.
Pajero Manufacturing's plant stopped turning out Pajero cars for the domestic market in 2019. The plant currently produces Pajero SUVs for export and Delica D:5 minivans and Outlander SUVs.
The plant manufactured 63,000 vehicles in fiscal 2019, accounting for about 10% of Mitsubishi Motors' overall domestic production.
With the closure of the plant, production of Delica and Outlander cars are expected to be relocated to Okazaki Manufacturing, a Mitsubishi Motors subsidiary based in the Aichi Prefecture city of Okazaki, and elsewhere.
Most of about 900 employees at Pajero Manufacturing's plant are likely to be reassigned. It will be the first domestic Mitsubishi Motors plant to be closed in about 20 years. In 2001, the company's Ooe plant in the Aichi Prefecture capital of Nagoya was shut.
Mitsubishi Motors accepted an equity investment from Nissan Motor in 2016 and joined the auto alliance between its larger domestic peer and French carmaker Renault, as its business performance deteriorated due to a fuel-economy scandal.
Former Nissan Chairman Carlos Ghosn doubled as Mitsubishi Motors' chairman and pushed ahead with a global expansion strategy with an eye on boosting that company's market share in major countries in the world.
But growth in Mitsubishi Motors' sales has been sluggish and the automaker's fixed cost burden has increased. The carmaker has been dealt an additional blow by a sharp decline in demand for new cars due to the novel coronavirus pandemic.
Mitsubishi Motors' new mid-term management plan will call for cutting fixed costs by around 100 billion yen ($935 million). Closing Pajero Manufacturing's plant will be a pillar of such cost-cutting efforts, the sources said.
Pajero Manufacturing's predecessor is Toyo Koki, which was established in 1943 to produce aircraft parts. After World War II, it became an automotive body manufacturing company, producing Pajero and other cars, primarily for Mitsubishi Motors, on a contract basis.
Mitsubishi Motors made the company its subsidiary and renamed it Pajero Manufacturing in 1995. Mitsubishi Motors made Pajero Manufacturing its wholly owned subsidiary in 2003.