Mitsubishi Predicts $1.39 Billion Loss

Jun 23, 2016

 

Yoshihiko Kuroi, senior executive officer at Mitsubishi, at Wednesday’s news conference. A net annual loss would be Mitsubishi’s first in eight years. Kyodo News, via Associated Press

TOKYO — Mitsubishi Motors said Wednesday that it expected to incur a loss of 145 billion yen, or $1.39 billion, this year as it faces the fallout from a scandal over falsified fuel-economy ratings.
 

The net loss, forecast for the fiscal year to March, would be Mitsubishi’s first in eight years. The scandal prompted Mitsubishi to seek a $2.2 billion rescue from its fellow Japanese automaker Nissan Motor last month as it struggled with falling sales and the rising cost of compensating customers.
 

The episode has already cost Mitsubishi a significant amount of independence. The carmaker gave up about one-third of the company in return for its financial lifeline, becoming part of a global automotive group centered on Nissan and Renault of France.
 

In April, Mitsubishi admitted using unapproved mileage tests on cars it sells in Japan, which exaggerated the vehicles’ stated fuel performance. The company said that it had been cheating on its mileage tests for a quarter-century and that all models in its domestic lineup were affected. Its chief executive has since stepped down.
 

Mitsubishi said it planned to book ¥150 billion in one-time charges related to the manipulated fuel tests. The amount includes ¥100 billion in payments to Nissan, which sold the most affected models, a line of ultralight minicars, under its own brand in a joint venture with Mitsubishi.
 

Mitsubishi will also compensate buyers directly and absorb the cost of lost tax breaks that its cars previously enjoyed because of their advertised fuel efficiency.
 

Mitsubishi’s admission was part of a series of cheating revelations in the automobile industry. Carmakers’ reporting of fuel economy and pollution ratings is under especially close scrutiny after Volkswagen admitted last year that it had installed software in 11 million diesel vehicles to cheat on emissions tests.
 

Mitsubishi’s cheating centered on the way engineers calculate what is known as running resistance, or the effect that tire friction and other factors have on fuel consumption under various driving conditions. Mitsubishi used test parameters that were not approved in Japan and that tended to flatter the cars’ fuel-consumption ratings, in the most extreme cases by as much as 15 percent.

Source: The New York Times