Losses were reduced during the six months through September compared to a year ago because of the absence of one-time losses charged the previous year for free vehicle inspection programs to win back customer trust and clean up its image.

Mitsubishi Motors, the nation's fourth-biggest carmaker, has seen its sales in Japan plunge after acknowledging five years ago that it had systematically hidden auto defects for more than two decades to avoid recalls.

Since then it has announced a string of recalls, including recalls for the same vehicles recalled earlier. In a further embarrassment, the cover-ups have continued even after executives had repeatedly promised to come clean.

The Tokyo-based manufacturer has also been battered by over-extending itself with loans to buyers with bad credit in the United States, a key auto market, where other Japanese automakers are reporting booming sales.

For the full year ending March 31, 2006, Mitsubishi Motors is expecting to post a 64 billion yen ($544 million) loss on 2.22 trillion yen ($19 billion) sales, unchanged from its earlier forecast.

Although sales are coming back, other uncertainties remain, such as the prospects for the overall U.S. auto market and soaring oil prices, the company said.

For the first half, Mitsubishi sold 659,000 vehicles around the world, up 2 percent from 646,000 the same period for fiscal 2004. Vehicle sales were up in Japan, but fell in North America, mainly on rental fleet sale declines.

Mitsubishi Motors said it was on a solid track to achieve a turnaround, noting that its first half sales were above its own forecast, and its losses were below its forecast.

The automaker has been getting financial bailouts from the Mitsubishi group of companies, including a bank, heavy machinery maker and trading company, after DaimlerChrysler AG of Germany withdrew its financial backing for the automaker last year.

DaimlerChrysler is no longer a major stockholder in Mitsubishi Motors, although it remains the top shareholder in Mitsubishi's former truck unit.

Mitsubishi Motors has been introducing new models in both the Japanese and North American markets, hoping to boost sales, but it is still unclear whether Japanese consumers have forgotten about the company's tarnished image.

It is also unclear how a money-losing automaker will fare amid intensifying competition in the auto sector, when expensive technological innovations are increasingly key to maintaining market share.

Even powerful companies such as General Motors Corp. and Ford Motor Co. of the United States are losing money, as huge incentive discounts to win over buyers in North American take their toll of earnings.

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