Mitsubishi Motors President to Resign as Japan Auto Scandal Engulfs Suzuki

Mitsubishi’s TetsuroAikawa to leave company in June; Suzuki admits to testing vehicles improperly
A fuel-economy testing scandal broadened in Japan on Wednesday, with Mitsubishi Motors Corp. saying its president would resign to take responsibility for overstating mileage in some cars and Suzuki Motor Corp. admitting to improperly testing its vehicles.
The moves by two of Japan’s second-tier car makers, both grappling with fierce competition and limited research-and-development budgets, came after Mitsubishi admitted to manipulating fuel-economy-related data and using an illegal testing method for multiple models in Japan.
Mitsubishi and Suzuki are among several global auto makers under scrutiny after Volkswagen AG late last year said it used illegal software on some of its diesel-powered vehicles to cheat on U.S. emissions tests.
Mitsubishi President TetsuroAikawa will step down in June at the company’s annual shareholders’ meeting. “I must step down so that a fundamental reform can take place in the vehicle development department,” said Mr. Aikawa, who formerly led that division.
Mitsubishi has struggled to combat repeated instances of hiding quality and other problems that hurt its reputation despite effortsover the last 16 years, executives said. Behind the problems were pressure from management to speed up development cycles and improve fuel economy, it said in a statement.
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Nissan said it would pay about $2.2 billion for a 34% stake in Mitsubishi Motors, which recently revealed that it falsified fuel-economy data. Photo: Getty Images
Nissan Motor Co. last week agreed to take a 34% controlling stake in Mitsubishi for more than $2 billion, subject to regulatory approval. It said it would help Japan’s sixth biggest auto maker by global sales volume rebuild its damaged brand image and is set to send in an executive to head Mitsubishi’s vehicle development.
Mitsubishi’s sales are declining and its costs are ballooning after it first admitted in April to falsifying data related to fuel economy to make mileage look better on four models, so-called minicars sold only in Japan. Two of these minicars, with 0.66 liter engines, were manufactured by Mitsubishi and sold under Nissan’s brand name.

Mitsubishi said Wednesday that data manipulation also took place beyond minicars, in some versions of its Pajero and RVR sport-utility vehicles in Japan. Executives said they believe there was no intention to overstate fuel economy in these cars, but that details are under investigation by a third-party panel.
None of its vehicles sold overseas are affected by the mileage problem, Mitsubishi has said.
Auto makers selling vehicles in Japan had faced a Wednesday deadline to report to the nation’s regulators whether they had violated mileage-related rules. Suzuki was the only one that admitted to a problem, Japan’s transport ministry said.
Suzuki, Japan’s fourth biggest auto maker, said it used an improper method to test mileage data since around 2010 on 16 models it currently sells in Japan.
In measuring vehicles’ air and tire resistance, data that is used to calculate fuel economy, Suzuki said it had used a testing method that wasn’t approved by Japanese regulators on around 2.1 million vehicles sold domestically.
“We apologize for not having used the designated measuring method,” Suzuki Chief Executive Osamu Suzuki said at a news conference, bowing deeply.
Suzuki shares closed down 9.4% in Tokyo after earlier falling by as much as 15%. Mitsubishi Motors stock rose 4% to ¥556 ($5.07); it is down 51% in the last year.
Suzuki said it believes it wasn’t necessary to revise mileage data for these cars. Tests of their fuel-economy performance using the proper method resulted in no significant differences, it said.
Suzuki executives said the testing method it had used violated Japan’s law in two ways. First, instead of testing vehicles’ resistance outdoors, Suzuki measured them indoors. Second, it gauged resistance for components, such as tires and transmission, individually and then added them up rather than measuring them all at once.
Some of the vehicles that Suzuki said were tested improperly also were minicars. The rising popularity of minicarsin recent years has prompted companies like Mitsubishi and Nissan, smaller players in the segment, to develop new models, triggering fierce competition.
The segment accounted for some 40% of the Japan’s overall auto sales of around five million vehicles in 2015, up from a third a decade ago.
Fuel economy has been among the key factors in marketing minicars. Mitsubishi said it had set tough targets for the four minicars in which it intentionally manipulated data to make mileage look better, but left much of the job to meet those targets to an engineering subsidiary. Mitsubishi managers were lax in checking the subsidiary’s progress, executives said.
A panel consisting of external members is still probing the problem. It is set to compile a report around July, Mitsubishi has said.

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