Japan’s second-largest automaker, Nissan Motors, may seek a major stake in embattled Mitsubishi Motors, using the smaller maker’s fuel economy cheating scandal as a way to take control at a bargain price.
Reports by Japanese broadcaster NHK and others indicate Nissan is in talks to take a one-third stake for about $1.8 billion. The share price of Mitsubishi has fallen by nearly half during the past month, in the wake of initial reports that the ninth-largest Japanese automaker inflated the fuel economy numbers of four vehicles it produced for the home market. Two of those were sold by Nissan.
On Wednesday, senior officials released results of a preliminary internal report noting that fuel economy “was improperly calculated in nine other models currently sold in Japan, as well as in other models no longer sold in Japan.”
The maker earlier this month also acknowledged that the cheating on mileage tests likely began about 25 years ago. However, the maker has repeatedly insisted that fuel economy numbers were rigged only for the Japanese market. It has asserted that the mileage of vehicles sold in the U.S. show no irregularities. But American regulators have asked for additional information to validate that claim.
Mitsubishi is also facing an investigation by Japanese authorities that could lead to fines as well as potential criminal penalties.
According to the report, low-level engineers attempted to rig the numbers to meet the fuel economy targets set by their bosses. Managers failed to follow up to validate testing within the company, as well as work conducted by an unnamed subcontractor.
(Mitsubishi reveals it may have rigged mileage numbers for all vehicles. For more, Click Here.)
The internal report is being conducted by an independent panel of three lawyers, including a former Japanese prosecutor.
Besides taking a toll on Mitsubishi’s stock price, the scandal has resulted in a sharp downturn in the automaker’s home market sales. Meanwhile, industry analysts estimate the carmaker may have to spend more than $1 billion to make customers whole. Not only have they experienced lower mileage than promised but they could be forced to repay tax credits intended to reward buyers of high mileage vehicles.
Many of the models affected by the revelations are so-called kei cars, or microcars. With engines of around 550 cc, they traditionally offer great mileage and rock-bottom prices.
It’s not the first time Mitsubishi has gotten in trouble for ethical violations. In the early 2000s, the maker was caught covering up safety defects blamed for at least one death.
(Mileage scandal expected to lead to ouster of top Mitsubishi execs. Click Here for the story.)
Meanwhile, financial mismanagement, especially in the U.S., nearly bankrupted the carmaker, forcing a bailout by a consortium of Japanese financial institutions.
After years of declining sales, the maker had only recently begun to regain momentum in the American market with new products like the Outlander SUV.
Mitsubishi has been keeping its factories humming by supplying some of its kei car models to Nissan for the Japanese market. The bigger maker actually touched off the crisis when it questioned apparently flawed fuel economy data for Mitsubishi-made models the Nissan Dayz and Dayz Roox. The smaller maker soon acknowledged bending the numbers for those vehicles, as well as two others sold under its own name, the Mitsubishi eK Wagon and eK Space.
If the reports prove accurate, Nissan could get a bargain on the damaged brand. Reuter’s puts the price tag under discussion at $1.8 billion for a one-third stake in Mitsubishi. Exactly what the bigger company might plan for the future is uncertain. While it has large product developed and manufacturing operations, Mitsubishi’s brand name has been clearly tarnished.
(To see about automakers under fire for bending the truth, Click Here.)
The mileage scandal comes at a time when a number of automakers are dealing with ethical issues. General Motors was heavily fined as part of a criminal investigation looking into its decade-long cover-up of a deadly ignition switch defect. Volkswagen, meanwhile, is struggling to get through a scandal involving the rigging of diesel emissions tests for 11 million vehicles.