Mitsubishi Takes $480 Million Charge for Fuel Economy Fraud

  • Test data falsified on 20 models sold in Japan since 2006
  • Mitsubishi says additional disclosure won’t affect Nissan deal

Mitsubishi Motors Corp. said it will book a charge of 50 billion yen ($480 million) this fiscal year to compensate buyers for manipulating fuel-efficiency ratings, as it admits to falsifying test data for 20 models that it sold in Japan in the past decade.

Mitsubishi Motors used “desktop calculations” instead of running actual field tests and falsified data on the models sold from 2006 to this year, the company said in a statement Friday. The company intentionally lowered resistance readings on some models, resulting in better fuel-economy ratings. The carmaker reiterated it didn’t find any data falsification in models sold overseas.

The automaker said it expects the transport ministry to sign off on the recalculated fuel efficiency ratings of its minicars by the end of June, paving the way for the company to resume sales. Mitsubishi said it won’t be able to recalculate the correct mileage for older models.

The latest disclosure provides more clarity on the scope of the crisis for the automaker, which has admitted to overstating the fuel economy of its minicars and improperly testing other existing models. The scandal has damaged the Mitsubishi Motors brand, claimed two top executives, cut earnings and forced the company to turn to Nissan Motor Co. to bail it out with the purchase of a $2.2 billion stake.

Mitsubishi Motors shares rose 6.4 percent to 547 yen in Tokyo trading, the biggest gain in a month, before the company’s announcement.

Compensating Users

Mitsubishi will compensate 100,000 yen to each minicar owner and will separately pay for the difference in gasoline costs and tax, Chairman Osamu Masuko said at a press briefing in Tokyo Friday. It will also pay 30,000 yen each to owners of five other models for which the carmaker manipulated mileage data, he said. The payments will be covered by the 50 billion yen charge, while the company assesses compensation to Nissan and suppliers, to be announced together with its business forecasts for this fiscal year, Masuko said.

Nissan Chief Executive Officer Carlos Ghosn is betting Mitsubishi Motors can contain the damage of its scandal to Japan and boost the larger automaker’s standing in emerging Southeast Asian markets, including Thailand, Indonesia and the Philippines. Nissan has said it plans to complete its checks in August and close the deal in October.

The latest findings won’t affect their pact with Nissan, which has told Mitsubishi to “carefully prevent” a repeat of the misdoings, said Masuko.

Nissan has already shown its intention to become the largest shareholder of Mitsubishi Motors and is conducting a due diligence, Nicholas Maxfield, a Nissan spokesman, said by phone.

A panel of three former prosecutors is investigating the improper testing. They are scheduled to report their findings around late July.

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