Mitsubishi Motors president to resign over fuel scandal

Mitsubishi Motors said its management created an environment for fraud

COO and executive vice president both leaving June 24 (Reuters)

Mitsubishi Motors President Tetsuro Aikawa will step down as the Japanese automaker looks to regroup from its widening fuel economy testing scandal with the backing of Nissan Motor.

Aikawa, 62, and Executive Vice President Ryugo Nakao will leave their positions effective June 24, according to a statement Wednesday. Mitsubishi Motors said its management created an environment for fraud, adding to disclosures that the company tested nine vehicles improperly and overstated the ratings of four minicars by as much as 15 per cent.

Mitsubishi Motors is seeking refuge under the protection of Nissan, which plans to buy a $2.2 billion stake and surpass Mitsubishi group companies to become the carmaker’s largest shareholder. Aikawa said he’ll ask Nissan to deploy a top executive to take charge of the development department at Mitsubishi Motors, after management exerted pressure to meet fuel economy targets.

The automaker used “desktop calculations” to determine the fuel economy of models including the Outlander plug-in hybrid and didn’t conduct test on the RVR sport utility vehicle, according to the statement. The company chose to continue using illegal methods because they led to results that deviated by about 2.3 per cent or less.

Turnaround Struggle

Chairman Osamu Masuko told reporters he’ll give up compensation he earns from now until the company forms a new management team. Aikawa and Masuko, 67, have struggled with the task of turning around Mitsubishi Motors’ reputation in Japan following the cover-up of defects including faulty axles that led wheels to detach in fatal accidents. That scandal prompted multiple bailouts from Mitsubishi group companies more than a decade ago.

Nissan Chief Executive Officer Carlos Ghosn is betting Mitsubishi Motors can contain the damage of its scandal to Japan and boost the larger automaker’s standing in emerging Southeast Asian markets, including Thailand, Indonesia and the Philippines. Mitsubishi Motors has said its vehicles sold in the US are accurate and compliant.

Providing a lifeline to Mitsubishi Motors also preserves Nissan’s supply of the minicar models produced by a joint venture the two companies set up in late 2010. After suspending sales of the cars when Mitsubishi Motors first disclosed wrongdoing on April 20, Nissan reported that its Japan sales plunged 51 per cent in the minicar segment and 22 per cent overall for the full month.

A panel of three former prosecutors is investigating the improper testing that Mitsubishi Motors has said goes back as far back as 1991, as well as the mileage data manipulation. The investigators are due to report their findings around late July.

© 2016 Bloomberg L.P