Mitsubishi Motors Sees Orders in Japan Tumble After Scandal

  • Carmaker investigates faulty mileage tests dating back to 1991
  • Company may have to compensate customers, Nissan, government

Mitsubishi Motors Corp. said orders for its vehicles in Japan plunged after revelations it committed fuel-economy testing fraud for a quarter century.

The daily orders the company got in Japan halved after the April 20 announcement, President Tetsuro Aikawa said at an earnings briefing Wednesday in Tokyo. “It’s only been a week so it’s hard to foresee how things will be going forward.”

Tetsuro Aikawa in Tokyo on April 27.
Tetsuro Aikawa in Tokyo on April 27.
Photographer: Tomohiro Ohsumi/Bloomberg

The Japanese automaker, which delayed its profit forecast for the current fiscal year, said it’s carefully assessing the future impact from the testing irregularities. Aikawa said a day earlier that the carmaker had been improperly measuring the mileage of models since 1991, adding 11 years to the period of misconduct that executives initially disclosed last week.

Mitsubishi Motors has “very strong finances,” Managing Director Yutaka Tabata said at the briefing. While it’s hard to estimate the financial impact of the irregularities, the company won’t change its plans for a new factory in Indonesia, he said.

The company said it had cash and equivalents of 462.4 billion yen ($4.2 billion) as of end of March. Since the automaker hasn’t figured out which models are affected, it will not be possible to project the costs involved, according to Koji Endo, a Tokyo-based analyst with Advanced Research in Japan.

“Mitsubishi has more than 400 billion yen in cash, which is not small,” Endo said before the earnings announcement. “But what they have done is enough to blow all of this.”

U.S. Probe

The U.S. Environmental Protection Agency and the California Air Resources Board also announced a probe 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 an e-mailed statement Tuesday in Washington.

Mitsubishi Motors has yet to specify how many models the company certified without complying with Japanese law. The fraud already reported has also prompted a probe by U.S. regulators. The company’s board this week formed a panel of three ex-prosecutors to investigate for about three months.

Mitsubishi Motors shares fell Wednesday for a sixth day, slashing the company’s market value by 51 percent during that span to about 415 billion yen ($3.7 billion). The deepening crisis is the worst for the automaker since it admitted more than a decade ago that it covered up defects in its trucks. The flaws including faulty axles that led wheels to detach in fatal accidents. That scandal prompted multiple bailouts from Mitsubishi group companies.

Nissan Affected

The company said Tuesday it hasn’t decided how it will compensate customers. It’s in reimbursement talks with Nissan Motor Co., which buys minicars from the company to sell under its own brand. Nissan was supplied about three-quarters of the 625,000 minicars already identified as having been improperly tested and relying on manipulated data. 

Nissan has voluntarily stopped sales of the Japan-only models, called Dayz and Dayz Roox. The models are sold under the Mitsubishi brand as eK Wagon and eK Space.

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. While Volkswagen has set aside 16.2 billion euros ($18.2 billion) to cover the costs of its emissions-cheating scandal, Mitsubishi Motors has less money to work with. The company had 484.7 billion yen in cash and equivalents as of Dec. 31, the lowest among Japan’s major automakers at the end of December.

Japan’s transport ministry on Tuesday 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 was insufficient, Takao Onoda, 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 shouldn’t have been eligible for, Ryugo Nakao, an executive vice president, said last week.

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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE