A Cover Up At Mitsubishi?

As customer complaints rise, police probe the carmaker

You could call Motohiro Kaibara a Mitsubishi man. He works as a mechanic at his family's Mitsubishi Motors Corp. dealership in Kitakyushu, a city in southern Japan. And he will only drive a Mitsubishi. But Kaibara's faith began to unravel last year. That's when a customer nearly ran down his own grandchild while attempting to park a 1998 Mitsubishi Diamante. The driver had just put the car in reverse when it lurched backward, barely missing the child before crashing into a gate.

Mitsubishi tested the vehicle at its regional technical center in July, 1999, and insisted that nothing fundamental was amiss. But the customer, a retiree in his late 60s who asked not to be identified, says that twice more his $33,000 Diamante accelerated in reverse, almost causing collisions. Kaibara decided to check the car himself, though he was aware that these incidents were infrequent and hard to predict. Yet, to his surprise, the vehicle shot back a meter or so upon shifting into reverse.

Mitsubishi may have a problem here. In recent months, there have been other reports of reverse acceleration involving Diamante sedans. Allegations of a possible defect do not involve a large number of cases. But they come in the wake of revelations that over the last two decades Mitsubishi Motors has covered up thousands of complaints about glitches with its cars and trucks. Since August, the auto maker has announced the recall of 620,000 vehicles. Already, the company's reputation is suffering. Mitsubishi sales in Japan slumped 3.9% in August from a year ago. And the public-relations disaster poses a serious headache for DaimlerChrysler, which has agreed to acquire 34% of the Japanese auto maker.

SECRET REPAIRS. The problems won't go away. Police in Tokyo, where Mitsubishi Motors is headquartered, have launched an investigation into allegations that the company was criminally negligent in covering up defects. Mitsubishi has declined to comment on the ongoing probe. But investigators have told the Japanese press they have evidence indicating that serious car defects were secretly repaired at two Mitsubishi technical centers. In some cases, the sources said, engineers repaired or replaced car computers.

According to mechanic Kaibara, a faulty computer is probably to blame for the problems involving the Diamante sedan--and the model is believed to be part of the police probe. The Transport Ministry says so far authorities have documented seven cases of reverse acceleration--all involving Diamantes manufactured in the last three years.

Is the computer the culprit? No way, says Megumu Okubo, general manager of Mitsubishi Motors' car service department. "We believe drivers mistakenly hit the gas pedal instead of the brakes," he told BUSINESS WEEK. Yet Kaibara insists that, when he tested his customer's car, his foot wasn't on the gas pedal.

Okubo does say his company knows of about 20 cases of sudden acceleration--forward and backward--since the early 1980s. Twenty years ago, when Mitsubishi first began putting computers in cars, it's possible, he says, that a mixed signal in the electronic brain could have caused sudden acceleration. That's why Mitsubishi developed a "fail-proof" system consisting of two computers. If one fails, the other is supposed to take over. Okubo says Mitsubishi stands 100% behind the system. That, he asserts, is why the carmaker is sure drivers are at fault.

Try telling that to Shigeo Toyoda, the 57-year-old president of a small employment referral business in western Tokyo. After his Diamante lurched backward last September, hitting another car, Toyoda asked Mitsubishi to inspect the vehicle. The company said there was nothing wrong with it.

That's when Toyoda went into action, setting up a Web site where Mitsubishi owners can report car troubles. Toyoda has since received 1,000 reports of faulty brakes, engines that stall, and a few instances of sudden acceleration. He has passed on details of his case and three others to the police.

While activists like Toyoda are getting more assertive, matters haven't improved much for consumers. They have filed about 100 lawsuits against corporations since a Product Liability Law was enacted in 1995. But of the seven car cases that have gone to a court ruling, judges have always ruled against the plaintiff. There have been 13 auto cases settled out of court. And leading car-accident liability attorney Makio Sekine says there is no chance of a court victory in cases of sudden acceleration. "We don't have a discovery system to force carmakers to provide evidence," he says. "Japanese courts demand that the plaintiff provide 99% proof that the company is in the wrong."

Under judicial reforms, there are plans to introduce stiffer penalties for rogue corporations. Right now, a company can be fined $10,000 for each infraction--a pittance, considering that Mitsubishi's recall will cost $70 million. "In the next few years, Japan's legal system will improve," predicts Masato Nakamura, vice-chairman of the Tokyo Bar Assn. and a consumer-rights advocate. "Then we'll see consumers take on major companies."

LAWSUITS. Still, it's not easy to take on a Mitsubishi. Toyoda has received three visits from company executives who, he says, were rude and implied he was a liar. When Toyoda stepped up his online campaign, Mitsubishi filed a lawsuit in May demanding $5,000, or what they say it cost them to examine and test his Diamante. Last week, Toyoda launched a countersuit to get the carmaker to pay him $20,000 in damages. "Someone has to stand up to Mitsubishi," he says. "If I had hit and killed someone, I'd have ended up in prison."

Kaibara is also feeling pressure. Mitsubishi dispatched a senior engineer to his dealership to try to convince the mechanic that the car was trouble-free. But Kaibara remains resolute, insisting the problem is no mirage. "Many Mitsubishi mechanics believe it's a programming quirk," he says, "one that might be difficult to fix." Mitsubishi would do well to take seriously ordinary Japanese like Kaibara and Toyoda. Otherwise its reputation may be impossible to fix.

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