Mitsubishi Fuel Economy Scandal |
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Mini cars were small vehicles with 660cc petrol engines that were a hit in the Japanese market, though they had found little success overseas. Since Nissan did not have minicars in its line-up, it opted for a collaboration with Mitsubishi to produce them. Nissan and Mitsubishi announced on May 20, 2011, that they had signed a contract for the formation of a joint venture related to their minicar business in the Japanese market. The launch of the joint venture was part of an agreement signed in December 2010 to increase the scope of cooperation between the two companies. Nissan and Mitsubishi aimed to strengthen their competitiveness in the minicar business through this joint venture... |
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| Japan reformed its fuel economy testing rules in 1991. It issued precise rules for a ‘coasting test’ to define the air resistance of a vehicle. Mitsubishi, rather than using this technique, decided to generate a substitute method to determine air resistance. This method, which it referred to as a ‘high speed coasting test’, led to higher fuel economy results than the government instructed method. Some analysts opined that it was the rule changes in Japan’s coasting test that had led to Mitsubishi starting to cheat on fuel economy tests in 1991.... |
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| Carmakers came under extreme scrutiny about the claims they made about their vehicles after Volkswagen acknowledged in 2015 that it had manipulated emissions tests. In November 2015 when Nissan inspected the fuel consumption figures of its cars, it observed some inconsistencies while updating the Dayz model. . |
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| Mitsubishi was forecasting its first loss in eight years after setting aside compensation costs related to the scandal. The company posted a loss of JPY19.1 billion (US$173 million) in fiscal year 2015. As a result of this loss, Mitsubishi’s 2015 profit was revised downward from JPY82 billion to JPY72.5 billion (US$656 million). Sales plummeted and the company was pushed into an intense management crisis. It stopped the sale of the eK Wagon and the eK Space models and Dayz, Dayz Roox vehicles produced for Nissan in April 2016. .. |
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| Analysts felt that Mitsubishi had a big challenge on its hands – it had to regain its reputation as well as the trust of customers. As part of the turnaround strategy to rebuild Mitsubishi, Nissan said it would send an executive, Mitsuhiko Yamashita (Yamashita), to head vehicle development at Mitsubishi. Yamashita was a senior technology adviser at Nissan and led Nissan’s electric vehicle development. As per the Mitsubishi deal with Nissan, Nissan would become the top investor in Mitsubishi Motors.. |
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Exhibit I:Key Financials of Mitsubishi Motors Corp
Exhibit II: Stock Price Chart of Mitsubishi Motors Corp
Exhibit III: Mini Car Market Share in Japan (April 2015- March 2016).
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