Published on April 27th, 2016 | by Steve Hanley
Mitsubishi May Not Survive Fuel Economy Cheating Scandal
A week ago, Mitsubishi admitted it used fraudulent techniques to cheat on fuel economy tests. It said 625,000 vehicles were involved. All of them were Kei class cars intended for the Japanese home market. Kei cars tend to be microvans that pack as much interior volume into a small space.They enjoy several tax advantages under Japanese law.
In Japan’s crowded cities, maneuverability and ease of parking make them popular choices for families and small businesses. The engines in Kei class cars are limited to 660 cc. The closest most American will ever get to a Kei car is the Mitsubishi i-MiEV, which started life as a gasoline powered microcar in Japan 20 years ago.
Since the company admitted to its fraudulent ways, its market capitalization has been slashed by 50% and sales have gone nearly to zero. A report today in Automotive News suggests that Mitsubishi may not survive the crisis it has created. “Right now, understanding which cars and how many of them are at stake is the most important thing,” says Koji Endo, an analyst with Advanced Research Japan. After two press conferences in the span of a week, investors are “still waiting for a proper report.”
Things just got a lot worse for Mitsubishi. As reported in The Verge, the company now admits it has been fudging fuel economy numbers since 1991. That’s when Japanese regulators added a coasting test to its fuel economy test protocol. For reason that remain unclear, Mitsubishi never updated its testing procedures to comply with the new rules. As a result, the results obtained were higher by about 2.3%.
Ryugo Nakao, the company’s vice president, said that regulations changed in 1991 to reflect the stop-and-go driving style of Japanese city dwellers. Despite the change, Mitsubishi continued to use the older testing methods. “We should have switched, but it turns out we didn’t,” Nakao told reporters, adding that aggressive internal targets may have been triggered the cheating. “Judging by what the investigations have shown so far, it seems there was pressure,” he said.
It is no coincidence that internal pressure may also have been a major factor in Volkswagen’s decision to brazenly ignore proper procedure and create software designed to falsely report on the emissions of its diesel engines. Hubris is a cruel mistress.
Like Volkswagen, Mitsubishi has created a special panel to delve into the murky depths of this mess. It is tasked with finding out who knew what and when they new it. In the meantime, the company has no idea how many vehicles are involved or how it will compensate those affected by its actions. Depending on how many more vehicles were improperly tested, the company “will get into a situation where its survival is difficult,” analyst Endo said.
How unfortunate would it be if this disaster prevents the Mitsubishi Outlander plug-in hybrid, which is setting sales records in Europe, from ever reaching customers in America?