Mitsubishi's share price rose 9 per cent or 34 yen to close at 412 yen on the Tokyo Stock Exchange on speculation DaimlerChrysler would take it over.
"The takeover of course is a long-term target," DaimlerChrysler chief executive Mr Juergen Schrempp said in an interview with Der Spiegelmagazine on Sunday.
"We currently hold 37.3 per cent of Mitsubishi Motors. We will be able to take over the majority in 2003 at the earliest. Mitsubishi, however, needs to return to profitability and reduce debt," Mr Schrempp said.
But a Mitsubishi spokesman said DaimlerChrylser could up its 37.3 per cent stake as soon as October 2003.
Last month Mitsubishi said former DaimlerChrysler executive Mr Rolf Eckrodt would become its president and chief executive in June from his current post of chief operating officer.
DaimlerChrysler is battling to recover from a scandal in 2000 when it admitted failing to inform authorities about at least 64,000 customer complaints over faulty vehicles since 1977. It opted to repair the vehicles itself instead of issuing costly model-wide recalls.
Mitsubishi is now carrying out a drastic streamlining plan designed to cut 9,500 jobs or 14 per cent of its total workforce in an attempt to recover from the cover-up scandal.
Analysts estimate Mitsubishi Motors' debt at about 1.4 trillion yen.
AFP