Mitsubishi Motors Corporation (MMC) on Wednesday forecast a JPY145bn net loss for fiscal 2016 (to 31 March 2017) as a result of expected costs due to its wrongly stating fuel economy figures for a number of minicar car models sold in Japan. It had previously forecast a JPY726.6bn net profit.
“The announcement on the FY2016 forecasts [was] put ‘on hold’ in order to carefully assess the future impact from the ‘improper conduct in fuel consumption testing on vehicles manufactured by MMC’ which was announced on 20 April, 2016,” the automaker said in a statement.
“On 17 June, MMC submitted a report on the investigation results as well as preventative measures to [Japan’s] Ministry of Land, Infrastructure, Transport and Tourism concerning the improper conduct in fuel economy testing. Now that the full scope of the issue has been clarified, MMC was able to calculate forecasts.”
The automaker now expects sales to fall 16% year on year to JPY1910bn, operating income down 82% to JPY25bn and ordinary income off 77% to JPY32bn.
Its unit sales forecast is down 8% to 962,000 units broken down as:
- Japan: 60,000 units, down 41%
- North America: 138,000 units, up 2%
- Europe: 187,000 units, down 9%
- Asia: 331,000 units, up 3%
- Other regions: 246,000 units, down 13%
MMC last month booked a JPY19.1bn (US$174m) charge to reflect losses related to its fuel economy testing scandal which reduced profit last fiscal year [2015/6] by 19% and prompted a shake-up in top management.
The automaker said it earned JPY72.6bn for the fiscal year ended last 31 March, rather than the JPY89.1bn yen reported in April. Chairman Osamu Masuko said he’d add the role of president, replacing Tetsuro Aikawa, who said he’d resign. A former executive of Nissan Motor, which has signed an agreement to buy a 34% stake in Mitsubishi Motors, will head the development unit that manipulated fuel economy data and used test methods out of compliance with Japan law for 25 years.
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By GlobalDataA Bloomberg News report said the predicted net loss was more than double the deficit analysts had estimated. MMC had expected a JPY205bn hit from the fuel-economy scandal this fiscal year, though no additional charges were expected.
Chairman Osamu Masuko aims to resume minicar production early next month and has said he’s prepared to cut prices on models that aren’t as efficient as previously advertised, the report added.
Nissan, which plans to spend about JPY237.4bn for its 34% stake in MMC, expects common platforms and joint purchasing will result in synergies equal to about 20% of its investment, chief financial officer Joseph Peter told Bloomberg. The latest MMC announcement was to Nissan expectations and won’t impact its plans, he said after the company’s annual shareholders’ meeting.
For its part, Mitsubishi Motors estimates a JPY55bn negative impact from a decrease in domestic sales and expenses related to vehicle inspections. The financial hit from the scandal won’t carry over to the next financial year, and there are no plans to revise capital expenditures or spending on research and development, executive managing officer Yoshihiro Kuroi told Bloomberg on Wednesday.
The automaker will book JPY150bn in one-time charges related to faulty fuel tests, which will include JPY100bn yen in payments to Nissan, suppliers and the costs of halting production at its Mizushima plant. MMC said last week it would book a one-time charge of JPY50bn this fiscal year to compensate buyers, Bloomberg added.
The report also noted Japan’s Transport Minister Keiichi Ishii said on Tuesday the scandal had damaged the reputation of Japan’s motor industry and MMC would face stricter type certification for some time to come.
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