Mitsubishi admits falsifying car fuel performance data
Trading in Mitsubishi Motors shares was suspended on Thursday after the indicative price fell by its daily limit under a flood of sell orders after the Japanese carmaker admitted that some of its employees had falsified fuel economy data on at least 625,000 vehicles.
Mitsubishi, which was rocked by a safety scandal 16 years ago, said fuel efficiency was overstated by 5 to 10 per cent on four types of small cars sold in Japan.
It will now investigate whether any other Mitsubishi vehicles sold in Japan, or overseas, have also had their fuel economy exaggerated, in moves that analysts said could dramatically expand the scope of the affair.
Coming hard on the heels of the Volkswagen emissions scandal, Mitsubishi’s problems could further erode trust between consumers and the car industry, and prompt tighter regulatory supervision of vehicle performance.
“We believe this manipulation [of testing data] was deliberate,” said Tetsuro Aikawa, Mitsubishi Motors’ president, who apologised for the cheating by making the traditional Japanese bow of contrition at a packed news conference. “It is clear that the intention was to make fuel-efficiency figures look better.”
Mr Aikawa warned that the affair was likely to have a significant impact on the company’s profits. “We do not know how much this problem will spread, particularly in Japan, since all the facts have not been pieced together,” he said.
Shares in Mitsubishi Motors fell by their largest amount in more than a decade on Wednesday, dropping 15 per cent after the company called the late-afternoon news conference.
Mitsubishi said the manipulation of fuel economy data affected four types of mini-cars. These vehicles were made by Mitsubishi, but two of the four types were sold under the Nissan brand.
Mitsubishi will immediately halt manufacturing and sales of the four petrol-powered cars.
The misconduct only came to light last year after Nissan, Mitsubishi’s partner in mini-cars since 2011, became aware of discrepancies in fuel-efficiency data when the two companies were developing a new generation of vehicles.
In December, Nissan called for a joint investigation, which was carried out in February.
The inquiry found that data derived from laboratory tests of the Mitsubishi mini-cars’ fuel economy showed higher results compared to when the vehicles were on the road.
Mr Aikawa was informed about the investigation finding indicating falsification on April 13.
Nissan said its priority was to find a solution for its customers when asked whether the company intended to take legal action against Mitsubishi. “Today, we have no plans to change our relationship,” it added.
An internal investigation by Mitsubishi found that the company’s fuel-economy testing method did not comply with requirements under Japanese law for models dating back to at least 2002.
Analysts said the biggest question in terms of the scandal’s financial toll was whether the misconduct was limited to mini-cars sold in Japan.
About 90 per cent of Mitsubishi’s annual sales of 1.1m vehicles are in overseas markets.
Mitsubishi executives said the company would investigate cars sold overseas and other vehicles in Japan to ensure there was no discrepancy in fuel economy data. The investigation is expected to last several months.
“The impact is immeasurable even if the problem is limited to mini-cars,” said Takaki Nakanishi, a former Merrill Lynch analyst who now runs his own research group. “But the situation will be extremely severe if it extends to overseas. That will decide its fate.”
Exaggerated fuel-economy figures are nothing new for the automobile industry. In late 2014, Hyundai and Kia, the South Korean carmakers, agreed to pay $300m to settle claims with regulators that they overstated fuel-economy statistics for more than 1m vehicles sold in the US.
The global auto industry has been rocked by several scandals over the past two years, including mass vehicle recalls prompted by safety concerns over airbags made by Takata, the Japanese company. Last September, as the VW emissions scandal broke, General Motors agreed to pay $900m to settle a criminal investigation by US regulators over an ignition switch problem that lawyers said had caused more than 100 deaths.
Nor is Mitsubishi Motors a stranger to scandal. In 2000, senior executives admitted to covering up vehicle defects for decades, tarnishing its reputation for safety.
The company was almost forced out of business due to collapsing sales before it was bailed out with emergency funding by other companies in the Mitsubishi group in 2004.
“For Mitsubishi it’s very embarrassing,” said Stuart Pearson, an analyst at Exane BNP Paribas. “Although this is very different to the VW case, you can certainly draw an analogy in terms of corporate culture concerns.” VW’s culture and governance has been criticised since the emissions scandal broke.
Mitsubishi said it would set up a committee of outside experts to look into the affair.
But Ryugo Nakao, Mitsubishi’s executive vice-president, suggested employees might have manipulated the test data in an effort to meet internal targets, although the company denied pressure from the management level.
It remains unclear how many employees were involved in the misconduct.