Five things to know about Mitsubishi Motors scandal

TOKYO Automaker Mitsubishi Motors Corp (MMC) (7211.T) says it used non-compliant fuel economy testing methods in Japan for as long as a quarter of a century.Following are some details on the cheating scandal:*What did MMC do, and why?¬†It rigged test data to overstate fuel economy readings of four mini-vehicle models sold in Japan by up to 10 percent. It says it did this to get a better fuel economy certification.Executives say developers may have been pressured into cheating as rivals including Daihatsu Motor (7262.T) set high fuel economy levels.MMC used a higher speed U.S. coasting test to measure fuel economy, ignoring 1991 changes in Japanese regulations to use tests that better reflect stop-and-go urban driving.In a January 2001 test, MMC compared readings using the two coasting tests, and found the difference was never more than 2.3 percent.*Which cars are affected?¬†Test manipulation involved 625,000 mini-vehicles produced since mid-2013: Mitsubishi’s eK Wagon and eK Space, and 468,000 cars it made for Nissan (7201.T), which markets them as the Dayz and Dayz Roox. All were sold in Japan.

MMC has stopped making and selling these models. 

More than 80 percent of Mitsubishi’s retail cars were sold in countries outside of Japan.
*Who discovered the cheating, and what are investigators focusing on? Nissan, which has a mini-vehicle venture with MMC since 2011, found a discrepancy in test data in November while updating the Dayz.MMC has set up an external committee to look into the affair. It will report in three months.

Japan’s transport ministry will test the fuel economy of Mitsubishi cars next week, and announce results on the first four models in June. It has found irregularities in mileage data on other MMC models, too, and wants an explanation by May 11.The ministry also has a taskforce to examine all Japanese automakers’ fuel economy data.*How much could all this cost MMC?Estimates vary and there’s still uncertainty as to how widescale the cheating was. It’s so far limited to Japan, where MMC sells just 10 percent of its cars.

MMC is likely to have to compensate drivers for the extra fuel used, repay government tax benefits, compensate Nissan and face potential legal suits and fines.Nomura puts the potential bill at close to $1 billion, or as much as 166,000 yen per car.* Can MMC withstand the fallout? MMC, which has lost around half its market value, or $3.7 billion, in just over a week, had over $4 billion in cash deposits at end-2015, and relatively little debt. Its cash-flow could suffer if its bruised branding hits sales. MMC has said orders for its cars in Japan have already halved.MMC produces 1 million vehicles a year, with one third of those sold elsewhere in Asia. It sold just 95,342 vehicles in the United States last year. It says its cars for the model years 2013 to 2017 sold in the U.S. have correct mileage ratings. (Reporting by Naomi Tajitsu; Editing by Ian Geoghegan)


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