Business / Corporate

Deepening tests scandal could throttle Mitsubishi Motors

by Masatsugu Horie, Monami Yui and Craig Trudell

Bloomberg

For the second time in about a decade, Mitsubishi Motors Corp. faces a scandal that poses an existential threat.

The automaker has improperly tested the fuel economy of its cars for the past quarter century, widening the scope of misconduct that executives initially said dated back to 2002. The Mitsubishi Motors board formed a panel of three ex-prosecutors to investigate for about three months. Until then, customers, investors and minicar partner Nissan Motor Co. may be left waiting for information about the number of affected models and details of compensation.

“I’m taking this as a case that could affect our company’s existence,” President Tetsuro Aikawa told reporters during a news conference Tuesday. “My mission is to solve the issue.”

The deepening crisis is the worst since the automaker covered up defective axles that led wheels to detach in fatal accidents, prompting multiple bailouts from Mitsubishi group companies.

“Right now, understanding which cars and how many of them are at stake is the most important thing,” Koji Endo, a Tokyo-based analyst with Advanced Research Japan, said by phone. After two press conferences in the span of a week, investors are “still waiting for a proper report.”

Mitsubishi Motors has not decided how it will compensate customers, Aikawa said. The company is in discussions about reimbursing Nissan, which was supplied about three-quarters of the 625,000 minicars that were improperly tested and relied on manipulated data. Nissan has since voluntarily stopped sales of the Japan-only models, called Dayz and Dayz Roox.

Depending on how many more vehicles were improperly tested, the company “will get into a situation where its survival is difficult,” Endo said.

Wrongdoing by the Japanese automaker and Volkswagen AG has prompted a reckoning of the ways carmakers test for and label the fuel economy and exhaust emissions of their vehicles. Government investigators last week raided French manufacturer PSA Group as part of broader checks into vehicle emissions, while Daimler AG initiated an internal probe into its certification process at the behest of the U.S. Department of Justice.

The U.S. Environmental Protection Agency and the California Air Resources Board also announced an investigation of whether models sold in the U.S. meet fuel economy regulations.

The EPA has instructed Mitsubishi to provide additional information on vehicles sold in the U.S. and will direct the company to conduct additional testing, EPA spokeswoman Julia Valentine said in a statement Tuesday in Washington.

Japan’s transport ministry asked Mitsubishi Motors to re-submit findings from its investigation of improper testing methods by May 11. An initial report that the company provided the regulator ahead of a Wednesday deadline was insufficient, a ministry official said Tuesday.

In addition to potential payouts to customers and Nissan, Mitsubishi Motors may have to pay back government tax rebates that its minicars should not have been eligible for, Ryugo Nakao, an executive vice president, has said.

Nissan first uncovered fuel economy discrepancies when working on development for the next generation of the minicars. Chief Executive Officer Carlos Ghosn said Monday that Nissan will decide on the future of the partnership after further verification.

Mitsubishi Motors had set stretch fuel economy goals for its engineers to achieve. Aikawa, 62, and other executives attended meetings where the company raised targets for the Nissan Dayz, Dayz Roox and Mitsubishi eK Wagon and eK Space minicars, Nakao said Tuesday.

“We aren’t able to deal with customers,” Aikawa told reporters Tuesday, adding that he wasn’t aware of the improper testing. “We’re just telling them that we’ll offer something.”

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