The original plans were scrapped and a two part MechaGodzilla was designed with the upper body becoming a jet, and its lower body becoming a tank, this set-up would end up being used for M.O.G.U.E.R.A. in being able to split into the Land Moguera and Star Falcon in Godzilla vs. SpaceGodzilla. Eventually MechaGodzilla was a single unit with Garuda attaching to him to form Super MechaGodzilla.
Early Draft (from Wikizilla)
The Transforming MechaGodzilla's role was nearly identical to the normal Heisei MechaGodzilla's role in the finished film, however one of its individual vehicle forms would have battled two pteranodons early in the film on Adonoa Island.
This MechaGodzilla would have successfully killed both Godzilla and Rodan later in the movie, but the Garuda would be destroyed and explode, causing Godzilla to be revived by the released radiation and destroy MechaGodzilla.
The Transforming MechaGodzilla was likely scrapped due to how expensive and difficult it would have been to portray the various machines and their fusion into MechaGodzilla. Toho may have also wanted to avoid too much similarity to King Joe, a mecha created by Tsuburaya Productions which moves around and transforms in a very similar way.
The Kaiju Guide entry for Super MechaGodzilla in Godzilla: The Game references Transforming MechaGodzilla.