Existence at risk as fraud case widens of Mitsubishi’s

TOKYO — For the second time in about a decade, Mitsubishi Motors Corp. faces a scandal that could affect the company’s existence.

The Japanese 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 board has 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 press conference Tuesday. “My mission is to solve the issue.”

On Tuesday, Mitsubishi shares plunged for a fifth day, slashing the company’s market value by half during that span to about 427 billion yen ($3.8 billion).

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. After two press conferences in the span of a week, investors are “still waiting for a proper report.”

Mitsubishi hasn’t 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.

Widening probes

Wrongdoing by the Japanese automaker and Volkswagen Group 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 initiated an internal probe into its certification process at the behest of the U.S. Department of Justice.

The EPA 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 an emailed statement Tuesday in Washington.

Japan’s transport ministry asked Mitsubishi 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 may have to pay back government tax rebates that its minicars shouldn’t have been eligible for, Ryugo Nakao, an executive vice president, has said.

Nissan decision

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

Mitsubishi 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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