Japan Orders Halved —Mitsubishi Motors

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United States 3,012,436
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Mitsubishi Motors Corp (7211.T) said Japanese orders for its cars have halved since it revealed last week it cheated on fuel economy tests, intensifying concerns over its prospects given an already chequered history of scandals.

The automaker said it may approach its financial backers, which include other Mitsubishi Group companies, for assistance if necessary, but its financial position is strong and it sees no need for fresh funding for now.

The company said last week it had manipulated mileage test data for four domestic mini-vehicle models, including two it produced for Nissan Motor Co (7201.T). This week, it admitted that it used fuel economy testing methods that didn’t comply with Japanese regulations for as many as 25 years, far longer than previously known. It has also said more models may have used those non-compliant tests.

“Since we made the announcement on April 20, our daily domestic vehicle orders have halved,” Chief Operating Officer Tetsuro Aikawa told reporters on Wednesday, referring both to mini-vehicles and regular models.

He also denied Japanese media reports that he and the company’s CEO Osamu Masuko plan to resign and take responsibility for the scandal.

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“It’s my responsibility and my mission to put the company on track to recovery. Beyond that, I haven’t had a chance to even consider (the possibility of resigning),” Aikawa said, calling the reports “based on speculation”.

One of Japan’s smaller automakers by sales, Mitsubishi Motors sold 1.048 million cars globally in the year to March, with around one third of those selling in Asia, its biggest market. Aikawa said he had “absolutely no plans” to pull out of the autos market.

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Having admitted to overstating the fuel economy of its mini-vehicles, Mitsubishi Motors may face a bill of close to $1 billion, according to Nomura analysts, to compensate drivers, re-pay government tax rebates and other payments – assuming a cost of 68,000-166,000 yen ($611-$1,491) per car, times the 625,000 cars so far affected. Goldman Sachs estimates a potential cost of up to 200,000 yen per car.

Mitsubishi Motors has launched an external investigation into its latest misconduct, which has revived memories of a scandal more than 15 years ago in which it admitted systematically covering up customer complaints for more than two decades.

Several years later, it had another setback when its truck affiliate admitted to concealing information about potentially dangerous defects, although it managed to secure a bailout that was part-funded by other Mitsubishi companies.

Senior officials at firms in the Mitsubishi group say it would be difficult for them to help the car maker this time, if needed, as they face their own financial squeeze, as well as calls to put shareholder returns above ties with the former Mitsubishi business empire.

Mitsubishi Motors said operating profit for the financial year just ended inched up 1.8 percent to 138.4 billion yen ($1.2 billion), while revenue climbed 4 percent. It gave no earnings guidance for the current financial year given the uncertainty over the mileage cheating scandal.

The company’s shares closed down almost 3 percent on Wednesday, at 422 yen, and have lost more than half their value since news of the scandal broke a week ago.

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