Jul 17 2015

Mitsubishi Motors Corp. said Friday it will end production at its lone light-vehicle assembly plant in the U.S., and aims to find a strategic buyer willing to maintain employment levels.The move underscores the second-tier Japanese car maker’s strategy to focus on Southeast Asia, its biggest market, as it struggles to maintain ground in a crowded U.S. market. Mitsubishi will continue selling vehicles in the U.S., the company said, and those vehicles will come from Japanese assembly operations that currently benefit from a weaker yen.

Mitsubishi’s Normal, Ill., plant—the lone Japanese assembly plant with United Auto Workers representation—built 28,000 Mitsubishi Outlander Sport SUVs through June, down 18.7% versus the same period in 2014, according to WardsAuto.com. About 1,250 people work at the plant, according to the company, and last year’s total production of 64,000 vehicles represented little more than half of the plant’s actual capacity.

“Following a review of Mitsubishi Motor Corporation’s global supply chain, we have been informed it is necessary to end production and seek a strategic buyer for the Normal plant,” the company’s U.S. subsidiary said in an emailed statement. “ MMC’s Board will make a formal decision in the near future and our focus right now is to identify a buyer who would continue to operate and maintain employment.”

The company said “the North American market remains a priority for Mitsubishi Motors. We will continue to sell Mitsubishi cars, including current and planned models, at Mitsubishi dealerships across the United States.”

The move is a speed bump for the UAW at a time when it is kicking off negotiations with Detroit’s auto makers. Unable to organize at the several auto plants run by German, Japanese and South Korean auto makers in the U.S., union officials have seen membership stagnant in recent years after suffering significant declines as domestic auto makers started downsizing decades ago.

Mitsubishi’s decision comes shortly after Ford Motor Co. decided to pull the plug on small-car output in Michigan, saying it will move production of the Focus and C-MAX small cars to another country. While Ford says it seeks to find another product for the Michigan factory, its inability to make a business case for small-car production highlights how difficult it is to build lower-margin products using U.S. factory workers.

Mitsubishi’s labor agreement with the union is set to expire next month. In 2010, the UAW agreed to a contract that lowered the hourly wage in order to keep the plant open.

In many cases, plants closed by U.S. auto makers remain empty or have been torn down as there are few operations that are large enough to occupy shut factories.“I don’t think you are going to see a lot of interest from any of the domestic auto makers,” James Ricci, a principal in auto-consulting firm Harbour Results Inc., said Friday. “I don’t see any Asian OEMs champing at the bit to be putting in capacity in the Midwest. That leaves the Chinese, but that’s unlikely too.”

Many union contracts have so-called “successor clauses” that require new owners abide by worker employment contracts. However, with the contract expiration coming soon, that would have to be built into a new contract.

Mitsubishi said it will discuss options with civic leaders and the UAW in coming months.One possibility for the Mitsubishi plant might be Tesla Motors Inc., Mr. Ricci said. The Palo Alto, Calif.-based company’s current plant in Fremont, Calif., was formerly a jointly owned Toyota Motor Corp. and General Motors Co. facility that employed UAW workers. Toyota sold it to Tesla in 2010 for $42 million and it no longer has UAW representation.

Recently, Volvo Car Corp. and Daimler AG’s Mercedes unit have announced separate $500 million factory-investment plans for South Carolina, where the threat of unionization is low. Several other auto makers have chosen Mexico as the destination for new investment, citing lower labor costs and extensive trade deals.

Auto makers currently weighing output expansion in North America include South Korea’s Hyundai Motor Co. and Fuji Heavy Industries Ltd.’s Subaru plant. Jaguar Land Rover Group, owned by Tata Motors, is considering a North American auto plant.

Mitsubishi sold 82,000 vehicles in the U.S. in the fiscal year that ended in March, holding around a 0.5% market share, the company said. The U.S. accounted for around 8% of Mitsubishi’s global sales of 1.1 million vehicles, it said.The auto maker’s Normal, Ill., plant began production in 1988 as a joint venture with former partner Chrysler, now owned by Fiat Chrysler Automobiles NV.

In 2012, Mitsubishi ended car production in Western Europe, selling its Netherlands plant to bus maker VDL Groep for €1 ($1.10) on the condition that the facility’s workers would keep their jobs.