Automaker Mitsubishi Motors Corp (MMC) has been the talk of town ever since it came clean about altering data during fuel economy tests to achieve better result. It got worse for Mitsubishi when they later found out that the altering of data goes back to over 25 years, making it one of the biggest scandals to ever hit the auto industry.
In case you missed out, we’ve explained the scandal in five simple questions below.
What did Mitsubishi 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 set high fuel economy levels.
Mitsubishi used a higher speed US 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, Mitsubishi 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 6.25 lakh mini-vehicles produced since mid-2013: Mitsubishi’s eK Wagon and eK Space, and 4.68 lakh cars it made for Nissan, which markets them as the Dayz and Dayz Roox. All were sold in Japan.
Mitsubishi has stopped making and selling these models.
Who Discovered the Cheating, and What are Investigators Focusing on?
Nissan, which has a mini-vehicle venture with Mitsubishi since 2011, found a discrepancy in test data in November while updating the Dayz.
The automaker 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 Mitsubishi models, too, and wants an explanation by 11 May.
The ministry also has a taskforce to examine all Japanese automakers’ fuel economy data.
How Much Could all This Cost Mitsubishi?
Estimates vary and there’s still uncertainty as to how widescale the cheating was. It’s so far limited to Japan, where Mitsubishi sells just 10 percent of its cars.
The automaker 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 Mitsubishi Withstand the Fallout?
Mitsubishi, 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. The automaker has said orders for its cars in Japan have already halved.
Mitsubishi 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 US have correct mileage ratings.
(With inputs from Reuters)
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