Mitsubishi Motors Corp., Japan's fifth-largest automobile manufacturer, and Chrysler Corp. today announced an agreement in principle to establish a joint-venture factory in the United States capable of producing 180,000 vehicles a year.
Each company will contribute $250 million, and Mitsubishi will take the lead in day-to-day operations and plant and car design. The factory, to be built in the Midwest, is scheduled to begin production in the second half of 1988 and employ 2,500 workers at full capacity.
Chrysler Chairman Lee Iacocca and Mitsubishi Motors President Toyoo Tate signed a memorandum of understanding in Tokyo today, with formal agreement to come after final details are worked out, Mitsubishi said.
"The market in the United States is the world's biggest," Tate told a press conference this evening. "Our company is focusing on it. However, it is hard to freely export to the U.S., so we are planning a long, good relationship with Chrysler."
Mitsubishi will become the fifth Japanese auto company to open or announce plans for U.S. factories. Already, Toyota, Nissan and Honda are producing cars, and Mazda has announced plans for a factory in Flat Rock, Mich.
The shift toward U.S. production is an effort to beat restrictions in force on Japanese auto exports to the United States since 1981. Although quotas have just risen 24 percent to 2.3 million a year, many companies feel investment in the United States is necessary to assure access to the highly profitable market there.
Chrysler, meanwhile, hopes to cut design, engineering and production costs through the joint venture.
Today's disclosure was made three days after Chrysler, General Motors and Toyota Motor Corp. announced an out-of-court settlement of a lawsuit Chrysler had brought to attempt to block a Toyota-GM joint production venture in Fremont, Calif.
Chrysler had contended that GM and Toyota were cooperating too broadly and that the deal constituted a restraint of trade. Under terms of the settlement, GM and Toyota agreed to shorten the planned period of cooperation from 12 to eight years.
The deal with Mitsubishi Motors will further cement Chrysler's 14-year-old tie-in with that company. Chrysler acquired a 15 percent interest in Mitsubishi in 1971 and reportedly wants 290,000 cars a year from it to be sold in the United States under the Chrysler name.
Mitisubishi Motors also announced today that Chrysler's stake in it will rise to 20 percent and then to 24 percent. The remaining shares, now held entirely by Mitsubishi Heavy Industries, will be distributed among other Mitsubishi group companies and the stock will be listed on the Tokyo Stock Exchange for the first time.
Mitsubishi has been exporting subcompacts to Chrysler for sale under the Dodge and Plymouth names since 1970. In 1981, Mitsubishi set up its own sales company in the United States in an attempt to establish its name and reputation independently.
The joint-venture plant is to manufacture a new-model small car to be engineered by Mitsubishi. Half of the cars produced are to be marketed by Chrysler itself and half by the Japanese partner's U.S. company, Mitsubishi Motor Sales of America.
According to Chrysler, the plant will result in creation of about 8,800 supplier jobs in the auto industry.
Mitsubishi Motors is part of the mammoth Mitsubishi industrial group, which claims to have introduced Japan's first standard production automobile, the "Mitsubishi A," in 1917.
Since its establishment as a separate entity in 1970, the motor company has increased production some two and a half times, although growth has stagnated somewhat in the 1980s.
The 1.17 million vehicles it turned out in 1984 covered the range from 32-ton trucks to 550-cc "minicars." Production is split about 50-50 both between passenger cars and commercial vehicles and between domestic and export models.
It employs 24,000 people (its chairman, Teruo Tojo, is the son of Japan's wartime prime minister, Hideki Tojo). In the year that ended March 31, 1984, it had sales equivalent to $4.7 billion at current exchange rates.
Quotas imposed in 1981 heavily restricted the potential for growth of Mitsubishi's auto sales in the United States. The restraints essentially froze each Japanese company's market share at the level of pre-1981, a time when Mitsubishi's U.S. patron, Chrysler, was in serious trouble.
Quotas that expired on March 31 awarded Mitsubishi only 122,610 of the total 1.85 million cars that Japanese producers were allowed to ship to the United States.
Negotiations are under way within the industry and Japanese government for division of the new 2.3-million-unit-per-year quota. According to Japanese press reports, the Ministry of International Trade and Industry favors raising Mitsubishi's export share to 186,010, a 52 percent rise, of which 140,490 would be for Chrysler and 45,520 for sale through its own network.
"Captive import" deals such as the Mitsubishi-Chrysler arrangement were cited by the Japanese government as a prime reason for its decision to raise the quota. However, the reported allocation still would let Mitsubishi ship only about half the number Chrysler reportedly wants.
Isuzu and Suzuki, two other smaller Japanese auto manufacturers, are reported to be in line for hefty rises, too. MITI is said to be planning a 137 percent rise for Isuzu, which has promised 200,000 cars to General Motors, and a 209 percent rise for Suzuki, which has promised 100,000 to GM.
Meanwhile, Nissan and Toyota, the two market leaders, are said to be likely to get only 12 1/2 percent increases.