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. Last Updated: 07/27/2016

Mitsubishi to Inject $3Bln in Motor Unit

TOKYO -- Mitsubishi group firms plan to pour up to 300 billion yen ($2.93 billion) more into Mitsubishi Motors Corp., which is still struggling to rebuild itself after receiving a hefty aid package last year, financial sources said Wednesday.

MMC, Japan's only unprofitable automaker, has been trying to improve its fortunes after former majority shareholder DaimlerChrysler gave up on its rehabilitation in April last year.

MMC secured an aid package of 496 billion yen from the Mitsubishi group and others at that time, but its troubles deepened when its past practice of covering up defects resurfaced. The subsequent blow to the brand led to a 40 percent plunge in domestic sales last year.

The sources said the Mitsubishi group firms, including machinery maker Mitsubishi Heavy Industries, trading house Mitsubishi Corp. and Mitsubishi Tokyo Financial Group, would buy common and preferred shares in MMC.

The companies may also take over some of MMC's assets and seek other forms of aid from the Bank of Tokyo-Mitsubishi, Mitsubishi Trust & Banking Corp. and others. In total, assistance could reach 400 billion to 500 billion yen, the sources said.

MMC said no final decision had been made on the details of its revitalization plan.

"[MMC] is currently evaluating details regarding business tie-ups, joint cooperation strategies and financial measures, including increases in capital ... At the present time, however, no final decision has been made," it said in a statement.

The company will announce the revival plan on Jan. 28, the centerpiece of which is expected to be the fresh aid and a strategy of supplying vehicles on an original equipment manufacturing, or OEM, basis to other automakers.

MMC said Monday it would supply 36,000 passenger mini-cars per year to rival Nissan Motor on top of the 20,000 mini-vehicles it already provides. The Jan. 28 announcement could also include an OEM deal with France's Peugeot Citroen, the sources said.

But Peugeot has ruled out a capital alliance, and Nissan's pact with MMC made no mention of a joint venture in mini-vehicles, contrary to previous media reports.

"Nissan's interest is limited to the development of mini-cars, and it seems unlikely that Nissan would undertake the kind of comprehensive tie-up envisioned by the Mitsubishi group," Morgan Stanley analyst Noriaki Hirakata wrote in a report dated Jan. 18.

Shares in Mitsubishi Motors have jumped 34 percent so far this year on hopes for the rehabilitation plan, but retreated 5.52 percent to 154 yen by Wednesday afternoon, against a 0.31 percent rise in the benchmark Nikkei average

Hirakata said MMC's share price could turn down after the business plan announcement, citing a likely delay in MMC's profit rebound by one year, and given that any additional financial aid would probably come at the price of further share dilution.

MMC in November widened its net loss forecast by 10 billion yen to 240 billion yen for the year to March 31, and warned it could book big valuation losses by next business year as it shrinks its excess output capacity.