In a hunt for profitability, the massive industrial company says the dramatic changes will streamline decision making.
Mitsubishi Electric Corp. has announced it will spin off its automotive equipment business.
The restructuring is aimed at streamlining decision making in the business and accelerating the transformation of the company’s automotive-equipment business to address rapid changes in this sector, including the shift to connected, autonomous, shared & service, and electric (CASE).
Mitsubishi Electric says the spin-off will improve operational efficiency and restructure the business portfolio for greater profitability.
According to the company’s consolidated financial report for fiscal year 2023, the automotive equipment business saw a year-on-year increase in in orders and revenue year-on-year due primarily to the weaker yen and increases in electric vehicle-related equipment such as motors, inverters and electrical components.
As a result, revenue for this segment increased by 12 percent year-on-year to about $14.9 billion.
Operating profit of the automotive equipment business decreased, however, due primarily to the rise in material prices and logistics costs, as well as impairment losses on fixed assets. As a result, operating profit for this segment decreased year-on-year to $857.6 million.
Mitsubishi says its CASE-related businesses, including electrification and advanced driver-assistance systems (ADAS), have promising market potential and will require very high levels of investment. The company is looking to collaborate with partners that offer technological synergies.
Focusing strategically on these fields and the company’s top-performing technologies is expected to put the automotive-equipment business on a stronger growth trajectory. Mitsubishi says in divisions that have competitive advantages, such as electric power-steering system products, the company will focus on cost reduction and efficiency enhancement by accelerating price shifting and reallocating resources to the most profitable projects.
Mitsubishi said it will “promptly discontinue” problematic automotive-equipment businesses, including its car multimedia, because of difficulty in improving profitability.
The spinoff will take the form of a company split, but the specific method, timing and other details were not made public.
