Mitsubishi on the brink after partner pulls plug

Japanese car giant Mitsubishi – burdened with multi-billion pound debts, plunging sales and a spate of recalls – suffered a major blow today when partner DaimlerChrysler ruled out pumping more cash into the company.

Shares in Mitsubishi Motors plunged by 25% in Tokyo, the day’s allowed limit, after DaimlerChrysler said it had “decided not to participate” in a planned capital increase.

The news killed speculation that the German-US car maker would unveil a revival plan that would include billions of pounds of additional cash.

“This is a disaster for Mitsubishi Motors,” said Koji Endo, car analyst at Credit Suisse First Boston in Tokyo, adding that the manufacturer was probably scrambling to find another partner. “The company is about to vanish if things continue this way.”

DaimlerChrysler’s Chief Financial Officer Manfred Gentz said a decision had not yet been made on what it will do with its 37% stake in Mitsubishi, which employs 43,801 workers worldwide.

“There is no decision for selling our stake, and we are not looking for someone to buy it,” Gentz said.

The Mitsubishi group of companies, major shareholders in the car maker that make up a powerful conglomerate with roots in the 1800s, was stunned.

A joint statement said the companies were looking into DaimlerChrysler’s announcement that came unexpectedly amid continuing talks to hammer out a revival plan together.

The Japanese government also expressed concern, indicating that a domestic bailout may be in the works.