Shares of Mitsubishi Motors Corp. plunged as much as 13% to a new low on Thursday after the embattled Japanese carmaker found more cases of vehicle defect cover-ups dating back 11 years.
Reuters saod tt was another major blow to the company after partner DaimlerChrysler cut off financial support, forcing it to scramble for some $US4 billion in rescue funds, and whose brand is still tainted by a major recall scandal four years ago.
Adding to its woes, Mitsubishi reportedly said on Thursday it was issuing a “normal recall” of more than 116,000 vehicles in Japan, which followed its admission late on Wednesday that about 160,000 cars spanning 17 models may need to be recalled.
Reuters said the company’s shares fell to an intraday low of 187 yen, below the previous life low of 197 marked in September 2001 when the stock – already hit by weak sales and an age discrimination lawsuit – tumbled with other automotive stocks after the Sept. 11, 2001, terrorist attacks.
The stock ended at 200 yen on Thursday, down 6.54% from the previous day and compared with a loss of 1.91% on the Nikkei 225 average, the report added.
Reuters noted that Mitsubishi discovered the latest cover-ups after looking into past practices of repairing safety-related defects secretly without issuing a formal recall as required by law.
“Some might say it is a sign of improving disclosure of a company in the process of rehabilitation. But still, its brand is badly hurt. For example, I wouldn’t buy Mitsubishi cars myself,” Masatoshi Sato, a strategist at Mizuho Investors Securities, told the news agency.
Reuters said share market reaction has ranged from guarded optimism that the carmaker has pulled back from the brink of bankruptcy to pessimism that it has neither the resources, the scale nor the brand to make it in the fiercely competitive motor industry.
Many have also questioned why Mitsubishi Motors’ share price is as high as it is, since the auto maker is offering shares to Tokyo-based fund Phoenix Capital at 100 yen as part of its rescue plan and there will be a large amount of share dilution, the report added.
“Either the market is ignoring valuations given the dilution that is going to occur, or the market is breathing a sigh of relief that it is going to survive,” Marc Desmidt, head of Japan equities at Merrill Lynch Investment Managers, told Reuters.
In its latest recall, Mitsubishi reportedly said it would recall more than 100,000 of its smaller Pajero SUVs and more than 8,000 Carisma sedans in Japan due to problems with the coating on the direction indicator.
Around 11,000 of its Pajero (Shogun) Pinin vehicles are affected overseas, the report said, adding that some EK minivehicles and Delica vans will also be recalled in Japan due to gear-related and axle-related parts problems. Total domestic recall costs are expected to come to $5.47 million, Reuters said.
In a sign that the loss of customer confidence in the three-diamond brand was taking its toll, data this week showed that domestic sales at Mitsubishi plunged 56 percent in May, while US sales fell 21 percent, the report added.