More Mitsubishi Models Included in Overstated Mileage Scandal, Company Admits

Mitsubishi Motors Corp said on Tuesday that it would temporarily stop domestic sales of affected vehicles and compensate owners and accepted that more of its vehicle models were involved in a mileage cheating scandal than initially stated.

In addition to four minivehicles initially confirmed in April, the fuel economy for eight vehicles including the RVR, Pajero and Outlander SUV models were over stated by the automaker said the Japan’s transport ministry earlier in the day, after receiving its investigation report which shown these new facts.

The millage scandal by Japan’s sixth-largest automaker had impacted two minivehicle models produced for Nissan Motor Co Ltd earlier and the latest announcement deals another reputational blow to Mitsubishi which has been struggling to recover from the mileage scandal which was discovered and reported earlier this year.

The ordeal from the scandal had prompted the company to seek financial assistance from Nissan, which agreed to buy a controlling one-third stake for $2.2 billion and the company’s market value has tumbled since the scandal broke.

After the ministry’s probe had shown the fuel economy for some models was as much as 8.8 percent lower than stated in marketing catalogues, Mitsubishi said it had submitted new mileage readings to the ministry earlier in the day.

“Both competition and compliance have tightened in the industry, but we had a lax approach to compliance and this was one of the factors which led to this issue. We need to change this,” Mitsubishi Motors President Masuko Osamu said at a briefing.

For roughly 76,000 owners in Japan, compensation of up to 100,000 yen ($977) each would be paid by the company, Mitsubishi said. Although the company said the amount would be covered in the expected extraordinary loss of 205 billion yen for this year, this would amount to an extraordinary loss of 7 billion yen.

The loss due to lost sales, compensation costs to customers and payments to Nissan, along with dealers and suppliers is expected to result in a net loss of $1.4 billion this year as the scandal will likely push it into the red for the first time in eight years, the automaker said.

The root of the automaker’s problems was poor communication, slack governance and pressure on resource-starved engineers, an internal investigation by the automaker uncovered.

In a process the ministry expected would take a few weeks and while Mitsubishi corrects marketing materials, the company said it would comply with the ministry’s demand for the automaker to stop selling the eight affected models.

Even as the vehicle numbers would be limited, the company was considering possible compensation for affected owners as the latest issue would affect some overseas models, Masuko said.

In order to calculate the fuel economy for its minivehicles, while it also used estimates, rather than data from actual tests, Mitsubishi has admitted to using unapproved methods to calculate mileage for 25 years.

Following markets including Asia ex-Japan, Europe and other regions, Japan is Mitsubishi fifth-largest market. Roughly 10 percent of its vehicle sales during 2015/16 was from its home country.

(Adapted from Reuters)

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