Mit­subishi fu­ture hangs in the bal­ance

Lesotho Times - - Motoring -

TOKYO — Sales are fall­ing off a cliff. Its rep­u­ta­tion is in tat­ters. And even its top ex­ec­u­tive is talk­ing about whether the au­tomaker will sur­vive.

Mit­subishi Mo­tors’ fu­ture is hang­ing in the bal­ance for the second time in a decade af­ter a bomb­shell ad­mis­sion that it has been cheat­ing on fuel-econ­omy tests for years.

The cri­sis is threat­en­ing to put the com­pany into the ditch per­ma­nently, but some an­a­lysts think the vast web of share­hold­ings among Ja­panese firms may just save it from the scrap yard.

“I re­ally think the fu­ture of Mit­subishi Mo­tors is grim,” said Hideyuki Kobayashi, a busi­ness pro­fes­sor at Hi­tot­sub­ashi Univer­sity, who au­thored a book about the com­pany’s strug­gles with an ear­lier cover-up.

“It would be silly to buy a Mit­subishi car af­ter this (scan­dal). This isn’t the first time this has hap­pened.”

In 2005, the maker of the Out­lander SUV and Lancer cars was pulled back from the brink of bank­ruptcy af­ter it was dis­cov­ered that it cov­ered up ve­hi­cle de­fects that caused fa­tal ac­ci­dents.

The vast Mit­subishi group of com­pa­nies stepped in with a se­ries of bailouts, sav­ing the em­bat­tled firm.

But it is not clear if they would be so will­ing to help this time around as the au­tomaker faces pos­si­bly huge fines, law­suits and cus­tomer com­pen­sa­tion costs.

The scan­dal has shone a light on the cozy re­la­tion­ships be­tween Ja­panese firms — in­clud­ing the big eq­uity stakes they hold in each other — which have come un­der re­newed scru­tiny in re­cent years.

Crit­ics say these mu­tual in­vest­ments pro­mote com­pla­cency and in­su­late medi­ocre man­age­ment from crit­i­cism, while Ja­pan’s pre­mier is push­ing to un­wind this web of in­vest­ment ties to help im­prove the coun­try’s woe­ful cor­po­rate gov­er­nance record.

‘Very dis­ap­point­ing’ Mit­subishi’s pres­i­dent ac­knowl­edged this week that his firm’s ex­is­tence was “at risk”, but its top share­holder re­vealed lit­tle about its in­ten­tions.

“Mit­subishi Mo­tors has come a long way since past prob­lems, so this is very dis­ap­point­ing,” said Shu­nichi Miyanaga, head of Mit­subishi Heavy In­dus­tries ( MHI), which holds over 12 per­cent of the au­tomaker’s shares.

“We need to think about the brand im­age of the Mit­subishi Group, its so­cial re­spon­si­bil­ity and ac­count­abil­ity for per­for­mance.”

The un­der-fire firm will also have to grap­ple with the like­li­hood of pay­ing dam­ages to Nis­san.

More than half of some 625,000 af­fected ve­hi­cles so far — all mini­cars sold in Ja­pan — were pro­duced for Nis­san, which un­cov­ered the prob­lems with Mit­subishi’s fuel-econ­omy data.

This week, Mit­subishi ad­mit­ted its faulty test­ing stretches back a quar­ter cen­tury, longer than first thought, so the odds that cars sold over­seas were in­volved has soared — along with the po­ten­tial scope of the cri­sis.

Un­named em­ploy­ees also fal­si­fied data to make cars look more fuel ef­fi­cient than they were, it has said.

“We don’t have the full pic­ture yet on how the com­pany would com­pen­sate” cus­tomers, said Seiji Sugiura, a se­nior auto an­a­lyst at Tokai Tokyo Re­search In­sti­tute.

“All Mit­subishi cars on the road right now could be sub­ject to com­pen­sa­tion costs, which would be mas­sive.”

The com­pany, which sold about one mil­lion ve­hi­cles glob­ally last year, has the least amount of cash among Ja­pan’s ma­jor au­tomak­ers and lacks the size of ri­vals such as Toy­ota and Honda to help weather the storm.

Sales in Ja­pan have dived by nearly half since the scan­dal broke last week, and the dam­age to its rep­u­ta­tion threat­ens to ham­mer its fi­nances.

But “the Mit­subishi brand re­mains strong in for­eign markets, es­pe­cially in Thai­land which has been a sig­nif­i­cant source of profit for the com­pany. There is also a new fac­tory in In­done­sia”, Sugiura said.

“There is foun­da­tion to build a re­cov­ery if the com­pany doesn’t get en­tan­gled in wrong­do­ing over­seas.”

A des­per­ate Mit­subishi may also em­brace a for­eign suitor if top share­hold­ers aban­don it.

Tai­wan’s Fox­conn re­cently snapped up strug­gling elec­tron­ics gi­ant Sharp, although for­eign takeovers of Ja­panese firms are rare.

The stakes are high given the Mit­subishi com­pa­nies’ long­stand­ing links, in­clud­ing dis­tri­bu­tion and prod­uct ties, ac­cord­ing to Sugiura.

“The group com­pa­nies also have to pro­tect their own in­ter­ests,” he said.

“Lots of busi­ness would be af­fected in the group if the au­tomaker col­lapses.”

— AP

Mit­subishi Mo­tors’ fu­ture is hang­ing in the bal­ance for the second time in a decade af­ter a bomb­shell ad­mis­sion that it has been cheat­ing on fuel-econ­omy tests for years.

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