Ministry chides Mitsubishi Motors over improper handling of recalls

Kyodo

Mitsubishi Motors Corp. has received an unusual warning from the government for what officials described as a “passive” stance regarding the recall of potentially defective cars.

The transport ministry is expected to inspect MMC shortly over the latest case, which concerns vehicles warranting recall for an extended period to November 2010 after MMC became aware of engine oil leaks in 2005.

The automaker has come under fire more than once for covering up consumer claims about potential defects since 2000.

On Wednesday, MMC filed with the ministry for a recall of minivehicles for a fourth time on the same potential oil leak since the first one in November 2010, with two cases having emerged following whistle-blowing.

The four recalls over the five years cover around 1.76 million units — the most ever recalled in Japan on account of a single defect type — of the Minicab, Town Box, eK-WAGON and seven other minivehicle models.

Of them, some 1.22 million units — built between January 1996 and October 2004 — are subject to Wednesday’s fourth recall action. MMC estimates around 200,000 of them would actually need some repairs.

According to the filing, oil leakage is feared as a result of a dislodged rubber seal in the engine, and the engine may be burned out while the car is running.

No accidents or injuries have been reported so far, the Ministry of Land, Infrastructure, Transport and Tourism said.

The recall action is expected to cut around ¥7.5 billion from the company’s bottom line in the year through next March.

The problem can also deal a serious blow if consumer confidence in the company’s vehicles is undermined as a result. MMC reported year-on-year drops in both sales and operating profits in the semiannual period through September.

MMC also handed the ministry a report of internal probe about its inaction over the period through October 2010 and subsequent nontimely actions.

The ministry summoned MMC executives and gave them verbal warnings. It was limited to verbal warnings as no legal violation was involved, according to the ministry.

“We didn’t have a firm grip on what was happening in the market. We would like to offer an apology to our customers,” MMC Senior Executive Officer Masao Omichi told a news conference.

Omichi said the company will establish clear-cut criteria for recalls and attempt to prevent a similar incident.

According to the internal investigation report, MMC became aware of a defect causing oil leaks from the engine shaft in February 2005. The transport ministry also obtained information about this defect and urged MMC to recall vehicles, but the company shrugged off the call, downplaying the defect.

At an internal meeting on the defect in January 2008, MMC officials determined it would not warrant a recall because no accidents or injuries had been reported and the defect cases were on the decline, the report said.

The ministry also requested a recall twice in 2009 after researching the defect on its own, and MMC complied in November 2010, the first of the four recalls on the same problem. The second and third recalls were filed in January and March this year, only after whistle-blowing by the same employee each time.

A critic said the ministry should have taken more resolute action against MMC when it first was informed of the defect.

MMC previously faced criticism over its handling of potentially defective products when, in July 2000, the company admitted covering up claims from consumers by offering repairs privately for around 30 years.

In January 2002, a hub defect caused a wheel to fly off a running MMC tractor-trailer rig in Yokohama and fatally strike a female pedestrian and injuring her two children.

MMC was later fined by a court for leaving the hub defect unattended in fear that a recall could cause financial damage.

MMC suffered a sharp decline in sales after its illegal coverup of consumer complaints in 2000. In business year 2000, it reported a massive ¥278.1 billion in consolidated loss.

It sought aid from other Mitsubishi group companies at that time. Osamu Masuko, the current president at MMC, was sent from Mitsubishi Corp., which led the group companies’ initiative for rebuilding MMC.