Japanese carmaker Mitsubishi Motor Corp. said Friday it would end U.S. production and seek a buyer for its underutilized factory in Normal, Ill.
Good news for Mitsubishi loyalists (and they are a dogged, if relatively small, bunch): the Japanese automaker is not abandoning the U.S. market altogether. "The North American market remains a priority," the company said in a statement. "We will continue to sell Mitsubishi cars, including current and planned models, at Mitsubishi dealerships across the United States."
The decision is bad news, however, for the plant's 1,280 full-time employees, including 1,000 or so UAW workers who had expected to begin negotiations on a new contract next month. They are the only unionized workforce at a Japanese-owned auto factory in the U.S.
It's also bad news for government leaders who for years showered the plant with local and state economic subsidies in an effort to attract and retain a strong manufacturing base.
The plant opened in 1988, lured by $249 million in state and local subsidies, according to The Chicago Tribune. It was originally a joint venture between
Annual production at the factory has fallen to 64,000 vehicles from more than 200,000 in 2002. The company has struggled to get a foothold in the lucrative U.S. market. Sales for the first half of the year were up 25 percent over the prior period, fueled by its best-selling Outlander Sport SUV. Still, Mitsubishi remains a bit player in the U.S. market, selling fewer than 78,000 vehicles in 2014.
About four years ago, after years of declining sales, Mitsubishi announced it would phase out production by 2014. That prompted the state of Illinois to pledge nearly $30 million in tax incentives over 10 years. In exchange, Mitsubishi promised to invest $45 million to produce the Outlander Sport and retain 1,200 jobs. The state has since doled out more than $7 million in tax vouchers and training funds, according to the Tribune.
"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," Mitsubishi said in a statement. "Our focus right now is to identify a buyer who would continue to operate and maintain employment – the best potential outcome for our employees and the community."
The plant closing came as no surprise to some industry-watchers. “Since the divorce from Chrysler and dropping volumes of sales, the U.S. plant was a serious drain on Mitsubishi’s balance sheet," said Matt DeLorenzo, managing editor for Kelley Blue Book's KBB.com. "If they could have a do over, I'm sure they'd rather have a non-union plant in a right-to-work state that could offer them more tax breaks than cash-strapped Illinois.”
I'm not so sure more tax breaks would have prevented the plant from leaving the state. Why throw good money after bad? Mitsubishi simply doesn't sell enough vehicles in North America to warrant the investment.
