Mitsubishi surges on hope of US recovery

JAPAN'S struggling Mitsubishi Motors - the country's only loss-making car maker - finally found something to cheer about today as it looked set to sign a deal to supply Peugeot Citroën.

The group also forecast that its American division is set to return to profit 'in two years' after a loss of 19.7bn yen (£102.7m) in the six months to September, new chief executive Rich Gilligan said in his first public statement since taking the job.

Gilligan took on the challenging US job last week after Finbarr O'Neill stepped down after just 16 months.

Earlier, reports said that the deal with Peugeot Citroën, Europe's second-biggest car maker, would see Mitsubishi supply it with some 40,000 vehicles a year.

A Mitsubishi spokesman confirmed the company was studying the possibility of partnerships with other auto manufacturers, including Peugeot.

'It is true that Mitsubishi Motors is studying the possibility of a business tie-up with PSA Peugeot Citroën,' Junji Nishihata said. 'But there are no concrete details decided at this point.'

Shares in Mitsubishi Motors rose 2.34% to 131 yen (65p), outperforming the Nikkei's 0.8%.

Gilligan rose from line worker to executive during a 30-year career with Ford and is the former head of Mitsubishi's US assembly plant in Normal, Illinois.

He unveiled the company's first pickup truck at the Detroit auto show which he hopes will reinvigorate sales in North America.

Gilligan would not comment on the Peugeot deal but said he would be 'excited' to build products for any auto maker to fill its under-utilised capacity in the Illinois plant.

American sales dropped 37% last year, despite a 1% increase in overall US vehicle sales.