The bad news just keeps on coming at Mitsubishi. Nigel Burton wonders how the group will dig itself out of trouble.

HOPES that the worst was over at Mitsubishi appear to have been misplaced. The Japanese company was plunged into crisis after an expected bail-out by shareholder Daimler Chrysler failed to materialise earlier this year.

Since then, a consortium of Japanese banks and businesses have rallied to Mitsubishi's cause and the company has talked bullishly of future growth.

But the latest financial figures tell a different story.

The company admitted last week that its losses had grown in the first half of the fiscal year.

Tokyo-based Mitsubishi reported a group net loss of 146.2 billion yen ($1.4 billion) in the six months to September 30, worse than the 80.2bn yen loss a year ago.

Sales plunged 11 per cent to 1.07 trillion yen ($10bn) from 1.21 trillion yen. The loss and sales figures were worse than the company forecast in May.

Officials admitted the group had lowered its sales expectations for the year and said it expected a larger full-year loss than previously forecast.

Mitsubishi has faced an uphill struggle in its home market after its image was tarnished by recurring scandals over cover-ups of vehicle defects.

After years of denial, the company has been forced into an astonishing U-turn.

In the past few months, it has announced more than 40 recalls after an internal investigation found a culture of cover-ups stretching back more than 25 years.

Even worse, the scandals continued even after Mitsubishi Motors acknowledged the problem four years ago and promised future transparency.

Thousands of Mitsubishi trucks were recalled this year for defects in a wheel design that caused cracks.

The former president of Mitsubishi Motors and the former chairman of its truck unit have been charged in two fatal accidents where defects are suspected.

The signs are that the cover-ups have offended the Japanese sense of honour among some customers, who have taken their business elsewhere.

Mitsubishi said recall and investigation costs totalled about 14.8bn yen ($140m). The company also spent 19.9bn yen ($189m) on measures designed to recover lost trust from drivers. The offers extended to free inspections of Mitsubishi cars. So far, 267,000 vehicles have been checked.

"Domestic sales continue to be in a tough situation, but we feel there are some signs of a recovery," Mitsubishi Motors president Hideyasu Tagaya said.

Sales have also been hit in North America, where the company is suffering in a cut-throat market.

Mitsubishi Motors sold 646,000 vehicles worldwide in the first half, down 16 per cent from 772,000 in the same period a year ago. In Japan, 96,000 vehicles were sold, down 44 per cent from 171,000 a year ago. In North America, sales fell to 92,000 vehicles, down 39 per cent from 150,000.

At least the group is performing more strongly in Europe, where new models such as the Colt and the Outlander are making in-roads among buyers who still acknowledge Mitsubishi's virtues of good construction and decent reliability.

Mitsubishi Motors lowered its sales forecast for the fiscal year ending March 31 next year to 1.4 million vehicles from 1.5 million the previous year, and also below its earlier forecast of 1.45 million vehicles.

It expects to sell 220,000 vehicles in Japan, down from the initial 300,000 vehicles projected in May, and 185,000 in North America, down from 233,000. It also raised its expected loss for the year to 240bn yen ($2.3bn) from its earlier forecast of a 230bn yen loss, and worse than the 215bn yen loss in the previous year.

It now expects sales of 2.1 trillion yen ($20bn), down from 2.5 trillion yen a year ago. It had initially hoped for sales of 2.25 trillion yen ($21bn).