Mitsubishi Motors has warned its debt would be worse than initial forecasts due to the recent global recall of 2.5m cars and restructuring costs.

The company is warning it could end the financial year in the red to a record £1.54 billion up from £133m last year.

Mitsubishi had forecast losses would be £803m.

The revelation was made today in a joint announcement by MMC president and CEO Takashi Sonobe and chief operating officer Rolf Eckrodt on a new corporate organization.

This involves a reduction in senior management in Japan, the establishment of an integrated car research and development and marketing department, global sales office, an independent car design office and the creation of a unified purchasing, including global sourcing and common supplier agreements.

The restructuring involves a 20% capacity reduction, a plant closure in Japan, a reduction in platforms from 12 to 6, a 15% reduction by 2003 in material costs and a 14% reduction in the group's global workforce.

Adding to Mitsubishi's woes was the recent admission of a cover-up of customer complaints which resulted in a recall of 2.5m vehicles.