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Mitsubishi Motors' Philippine plant buy highlights Asia push

TOKYO -- Mitsubishi Motors is working to strengthen its market position in Southeast Asia by increasing production in Thailand, Indonesia and the Philippines.

     The Japanese automaker is getting back on its feet after a difficult few years. Having bought back preferred shares that it issued to various companies in the Mitsubishi group to raise funds for its restructuring, it is now focusing on raising its profile in the key Southeast Asian market.

    Mitsubishi Motors' latest push is in the Philippines. The company said Monday it had struck an agreement with Ford Motor of the U.S. to purchase its plant in the country. The Philippines is a smaller car market than Thailand or Indonesia, with total annual sales of less than 200,000 units. But it is important to Mitsubishi Motors, which is the No. 2 carmaker in the country, after Toyota Motor.

     Mitsubishi's association with the Philippines dates back to the 1960s, when it began operating in the island nation through a tie-up with U.S. automaker Chrysler. Osamu Masuko, Mitsubishi Motors' president, is said to be especially fond of the Philippines and visited the country in March, meeting with President Benigno Aquino.

Expanding on the cheap

At present, Mitsubishi Motors makes about 30,000 cars a year in the Philippines, including the Lancer EX sedan and the Adventure minivan. It was considering acquiring a site to build a new plant, as its current factory is becoming outdated. Buying the old Ford plant, which has been closed since the U.S. company ended production in the country in 2012, lowered Mitsubishi Motors' capital investment costs.

     The plant, in Laguna Province southeast of Manila, is expected to begin production in January 2015 and will turn out around 50,000 cars a year. Operations at Mitsubishi Motors' existing plant in Rizal Province, near the capital, will be shifted gradually to the Laguna plant.

Many eggs, many baskets

Elsewhere in Southeast Asia, Mitsubishi Motors has opened a third plant in Thailand to build Mirage subcompacts, and it is working on a new factory in Indonesia.

     Although Thailand remains its key production base, the company has learned the importance of not relying too much on one country after operations were disrupted by flooding in the country in 2011. It is now spreading its manufacturing to other countries in the Association of Southeast Asian Nations, which has low internal trade tariffs.

     Mitsubishi Motors' purchase of the former Ford plant was likely driven in part by concern about what its rivals are up to. Collectively, Japanese automakers still control 80% of Southeast Asia's auto market. But South Korea's Hyundai Motor has been gaining ground with its competitively priced cars. Hyundai now has a 20% market share in the Philippines and ranks second in Vietnam, with 30% of the market.

     Volkswagen also poses a serious threat, as the German automaker continues to make inroads in India and China with its low-priced subcompacts.

     Mitsubishi Motors is trying to turn itself into a major Asian automaker. To that end, it is boosting production in the region while shutting down in Australia. In Europe, it took the drastic step of liquidating NedCar, its Dutch automaking unit, for 1 euro. Building competitive manufacturing bases in Thailand, Indonesia and the Philippines will be crucial if the company's Asian bet is to pay off.

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