Mitsubishi Motors Slumps on Government Recall Warning

Mitsubishi Motors Corp. fell the most in 21 months in Tokyo trading after receiving a government warning saying it was “passive” in its handling of engine oil leaks as the carmaker ordered a fourth round of recalls.

The stock slumped as much as 11 percent, headed for the biggest decline since March 2011, before falling 6.6 percent to 85 yen as of 11:06 a.m. Japan’s benchmark Nikkei 225 Stock Average fell 0.9 percent.

Mitsubishi has called back 1.76 million cars since November 2010, including the latest round announced yesterday, because of oil leakage that may cause engines to stop. Japan’s Transport Ministry said it will soon conduct an inspection of the company and ordered the automaker to submit a report by March about improvements made to address the problem.

“The share price will remain pressurized before the ministry’s inspection result is clear,” Satoru Takada, a Tokyo-based auto analyst at Toward the Infinite World Inc., said today by phone. “The impact of the recall on its reputation will offset” Mitsubishi’s efforts at boosting its operations including sales in Southeast Asia, he said.

Mitsubishi will ask owners to return eight models, including the Minica and Town Box minicars, for a total of 1.21 million vehicles in Japan, it said in a statement yesterday on the latest recall. The company will book a charge of 7.5 billion yen ($89 million) for the latest call back, it said.

‘Inappropriate Decisions’

“The ministry warned the company on having been passive in its handling of the recalls,” according to a ministry statement yesterday. Mitsubishi was also warned “for having made inappropriate decisions, for providing the ministry with inappropriate explanation, for being insufficient in clarifying the causes of the recall,” it said.

No accidents have been reported as a result of the defect, the ministry said.

“Recalls are quite common in the automotive industry,” said Ashvin Chotai, managing director of Intelligence Automotive Asia in London. “The difference between this one and the others is that Mitsubishi has failed repeatedly to deal with the issue.”

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